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Great Britain threatened by recession – Finance minister hopes for interest rate cuts – December 22, 2023

Great Britain threatened by recession – Finance minister hopes for interest rate cuts – December 22, 2023

LONDON (Reuters) – The British economy is one foot into recession.

Gross domestic product fell by 0.1 per cent in the July to September quarter compared with the previous quarter, the ONS statistics office reported on Friday. The previous estimate showed stagnation. If a second decline in a row follows in the final quarter, it is referred to as a technical recession. A look at the spring shows just how weak the British economy has been this year: according to just-revised data, growth of 0.2 percent from April to June just stagnated after a previously reported 0.2 percent.

“The medium-term outlook for the British economy is more optimistic than these figures suggest,” Finance Minister Jeremy Hunt said in an initial reaction. He is betting that the British central bank will cut its interest rates and provide fresh momentum. “If we can sustain the trend and reduce inflation, there is a possibility that the Bank of England will decide to cut interest rates,” he told the Financial Times.

The inflation rate declined to 3.9 percent in November from 4.6 percent in October. This was the lowest level since September 2021, mainly due to falling fuel prices. Although the central bank's inflation target of 2.0 percent is still not reached, challenges for interest rate cuts are mounting. An easing step is now strongly expected in futures markets in May. Overall, interest rates could fall by more than 1.35 percentage points over the next year. The Bank of England recently left the key monetary policy rate at 5.25 percent.

According to experts, the recent positive growth in the retail sector gives hope that the recession can still be avoided. Sales here rose 1.3 percent in November compared with October, as discounts during the “Black Friday” and “Cyber ​​Monday” promotional days boosted demand.

(Reporting by William Schomberg, Writing by Rene Wagner, Editing by Myria Mildenberger – If you have any questions, please contact our editorial team at [email protected])