GDP figure hits August rate cut hopes

HOPES of the Bank of England delivering an interest rate cut in August received a setback today when official figures showed the economy grew much faster than expected in May.

- Jonathan Prynn

Data from the Office for National Statistics (ONS) showed that GDP was up by 0.4% in the month boosted by a big bounce back in construction output, which had been depressed by prolonged wet weather earlier in the spring.

The robust data means that City markets now see another hold in rates at the current level of 5.25% as the slightly more likely outcome when the Bank’s Monetary Policy Committee (MPC) meets on 1 August.

That is a turnaround from earlier this week when they had ranked the chances of a cut at 60/40.