Inflation Could Force UK Rate Rise

UK economic growth looks set to continue, supported by consumer spending. But faster growth and inflation could force the Bank of England to raise rates in 2015

Coutts 23 October, 2013 | 4:39PM
Facebook Twitter LinkedIn

This article is part of Morningstar's "Perspectives" series, written by third-party contributors. Here, Mark McFarland, Global Chief Economist at Coutts gives his outlook for the UK.

After two years of flirting with recession the UK economy has shown some impressive signs of recovery, driven by a rebound in the housing market and improving consumer confidence. We expect the recovery to continue at a fast pace, driven by the government’s initiatives to boost lending, consumer spending and very loose monetary policy from the Bank of England (BoE). We believe the BoE could be under pressure to raise rates in the first quarter of 2015.

The UK recovery has recently gained momentum with corporate confidence in the services sector (as measured by purchasing managers’ indices) hitting its highest since 2007. After a long period of subdued growth and households reducing their borrowing, various initiatives to boost lending, such as the “Funding for Lending” and “Help to Buy” schemes seem to have had an impact on economic growth. Rebounding house and financial asset prices have supported consumer sentiment and spending. Strong private consumption and a revival in private investment are likely to surprise to the upside in the coming quarters.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

About Author

Coutts  Coutts provides customised solutions for clients private banking and wealth management needs.