This week brought some good news for the UK. Surprisingly strong growth in the first quarter of the year has pulled the UK out of recession. This needs to be kept in context as the economy is around 0.2% bigger than this time last year, but at least this is going in the right direction. This will no doubt be welcomed by Rishi Sunak who can chalk off another of his five pledges, although progress on the remaining three remains elusive. The only sting in the tail is that growth is coming from the services sector and brings the potential for upward pressure on inflation.
The Bank of England’s interest rate decision was more relevant for markets. In fact, it was the messaging that accompanied the decision that was important. Governor Andrew Bailey tried to avoid committing to a specific timetable for cuts, while giving the bank room to manoeuvre if the picture changes. But the BoE’s tone was much more accommodating than it has been, and the chance of UK and European interest rates diverging from the US has increased. This went down well with bond investors and helped the generally positive mood in equity markets.
For the following stories, please click on this link*
- UK: BofE leaves rates on hold as investors look for signs of a cut
- Property: Construction rises but high rates cool buyers’ interest
- Tech: Investors call time on ARM’s AI rally
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