Nearly 2 per cent growth in the UK economy is one of London’s leading economic-social research center analysts. They expect the British central bank, the Bank of England to raise interest rates next spring, more than a year earlier than expected by the Institute.
The National Institute of Economic and Social Research (NIESR) has explained the increase in gross domestic product (GDP) and its interest rate projections as expanded by the pound lower exchange rate and rising wages, as described in the British newspaper The Guardian on Wednesday.
According to the director of the research center, raising interest rates would contribute to the growth of banks’ profits and their reserves for a possible financial crisis. Jagjit Chadh thinks that the central bank can quickly return to a higher base rate – it can take up to 5-7 years – but this signal can be a great help for financial institutions to stabilize their situation.
In another analysis of the Center, the specialist described the weakness of the banking sector and its lending ability as the cause of slower economic growth in recent years in the United Kingdom. “The financial sector plays a key role, because every business needs the help of banks if they want to develop their business model and want to get credit,” he added.
NIESR’s forecast is, however, optimistic that the uncertainty accompanying UK membership of the European Union in 2019 is likely to be a disgrace to businesses in investing in Britain. According to data released last week, the economy grew 0.3 percent in the three months to end June, after 0.2 percent in the first quarter. Half of the former data are measured in the euro area.
The Monetary Policy Council of the Bank of England meets on Thursday and publishes its economic analysis and forecast, which, according to the comments, will be much more pessimistic than the NIESR center. Due to the weak performance and especially deteriorating prospects of the British economy at the beginning of the year, it does not seem too probable that the central bank will soon decide to raise interest rates.
Source: MTI / Picture: magyarkroki /