The Bank of England is anticipated to cut the base rate to 3.5 percent in the coming months, experts say. The prediction offers a boost for home buyers and the wider economy after nightmare inflation forced higher rates and clobbered the nation.
What’s more, the forecast arrives as the nation’s economy is poised to surge at double the pace previously expected this year, with experts calling on Rachel Reeves to ramp up investment to sustain this growth trajectory.
KPMG has revised its forecast for the UK’s gross domestic product (GDP) growth to 1 percent for this year, a significant increase from the 0.5 percent prediction made in July.
The consultancy also expects the economy to expand by 1.2 percent next year, an uptick from the earlier estimate of 0.9 per cent.
These optimistic projections emerge even as the Bank of England takes a gradual approach to lowering interest rates. KPMG projects another drop in the UK base rate later this year, predicting it will fall to 3.5 per cent by 2025 from the current 5 per cent.
Yael Selfin, KPMG UK’s chief economist, commented on the upcoming autumn budget, saying: “The autumn budget represents the first opportunity for the chancellor and the new government to start building the base for stronger growth, one of their principal objectives. It will inevitably require higher levels of public investment.”
A series of rapid economic shocks, such as the Covid-19 pandemic and energy crisis, could limit consumer demand due to increased caution.
KPMG stated: “The significant increase in the proportion of income put aside for savings could be more permanent, influencing consumer spending patterns over the medium to longer term.”
Over the past two years, interest rate hikes have encouraged households to save rather than spend. Despite lingering concerns about inflation, the OECD has upgraded its growth forecast for the UK for the next two years more than any other G-7 nation.
The think-tank has forecasted that the UK economy is set to expand by 1.1% this year after a “relatively robust” recent performance, with an additional growth of 1.2 percent expected in 2025. This projection for 2024 positions the UK just behind the US.
The total uplift of 0.9 percentage points surpasses that of any other G-7 nation. Despite these positive revisions, the UK’s economic prospects remain mid-table among the G-7 countries.
