Consecutive Falls in UK GDP Puts Interest Rate Cuts Back In Play

UK GDP has fallen for the 2^nd consecutive month by 0.1% in May (-0.3% in April), following Rachel Reeves’ attack on UK businesses for employers’ national insurance contributions and huge minimum wage increases.  This combined with Donald Trump’s tariffs war that may push the globe into slowdown and certainly, the UK is slowing down.

This may have given the Bank of England more room to consider an early cut in base interest rates.

Comment

We have previously forecast no rate cuts until the end of summer i.e., 18^th September 2025 but with the late GDP fall, rates cut be cut as early as 7^th August 2025 to try and kickstart the UK economy.

Inflation also influences the Bank of England’s decisions on interest rates, and the next Office for National Statistics (ONS) inflation report is next Wednesday on 16^th July, so this will make or break any interest rate cut move.

Depending upon inflation, we expect a rate cut of 0.25% to 4.0% pa.