Experts say 0.6% growth is no obstacle to rate cuts

THE UK’s run of solid economic growth should not delay the Bank of England making further interest rate cuts this autumn, City experts have said.

- Jonathan Prynn

Latest data from the Office for National Statistics (ONS) today showed that GDP advanced 0.6% in the April to June quarter, only a slight slowdown from the 0.7% seen in the first quarter.

If the bounce-backs from the deep Covid lockdown slumps are ignored, the UK has not enjoyed two consecutive quarters of growth above 0.5% since 2017.

However, analysts said rate-setters on the Bank’s Monetary Policy Committee (MPC) would be relaxed about the speed up in growth, particularly as it stalled again in June.

Thomas Pugh, economist at consulting firm RSM UK, said: “At 0.6% a quarter, this pace of growth is significantly above the UK’s meagre trend rate of about 0.3% a quarter, which might worry the Monetary Policy Committee that inflation pressure will rebound.

“But with the economy starting the year with plenty of spare capacity, a couple of quarters of above trend growth won’t be enough to risk the economy overheating and shouldn’t concern the MPC.”