By William Schomberg and Andy Bruce
LONDON (Reuters) – The British economy contracted in October, official data showed on Wednesday, raising the risk of a recession and testing the bank’s resolve to maintain its tough anti-inflation line against interest rate cuts. The highest level in 15 years.
British gross domestic product (GDP) fell 0.3% from September, the Office for National Statistics said, as unusually wet weather may have affected the data.
Economists polled by Reuters had expected no change in gross domestic product in October.
This is the first time since July that GDP contracted on a monthly basis.
Investors increased their bets that the Bank of England will start cutting interest rates in June 2024, and the yield on 10-year British government bonds fell to the lowest level since May.
However, the general expectation is that the central bank will keep interest rates on hold at 5.25% on Thursday and again signal that it is not close to cutting it as it tries to stabilize the UK’s still-high inflation rate of 4.6. % — coming under control at its most recent reading in October.
Paul Dales, chief UK economist at Capital Economics, said the October data suggested the UK could be in recession.
“This will move the Bank of England a little closer to cutting interest rates, although the bank will resist the idea of a rate cut in the short term by leaving rates at 5.25% tomorrow,” Dales said.
HSBC’s Elizabeth Martins expects another 6-3 vote from the BoE’s monetary policy committee to keep rates unchanged, but weak GDP data — released a day after signs of slowing wage growth — may lead some of the three members to prefer it. To join the majority who don’t want the changes, rates must be raised.
Jane Austen is a writer and contributor covering culture, literature, lifestyle, and society. Her work focuses on thoughtful storytelling, social trends, and the issues shaping everyday life, delivering engaging and accessible content for readers across the United Kingdom.
