Will the Bank of England raise interest rates push the UK into recession?

UK economic growth in June beat expectations, but opinions differ on the long-term effects and the effect of higher interest rates.

Economic growth boosted in June

In June, it was British economy It recorded a growth of 0.5%, driven by the production sector and increased consumption in bars and restaurants due to the hot weather.

Household consumption growth in the second quarter was 0.7%, despite the inflationary increase.

Future figures are expected to show that wage growth will outpace inflation, which will benefit real incomes of households.

Mixed economic prospects

Ruth Gregory of Capital Economics takes a less optimistic view, arguing that factors such as the coronation of a king made the numbers look better than they are.

Gregory also warns of the potential negative impact of recent interest rate increases, particularly in sectors such as real estate.

The expectation is that Gross Domestic Product (GDP) may decline in the third quarter, kicking off a potential recession.

Business investments and your future

Kitty Ussher of the Institute of Directors warns of corporate investment trends as a possible sign of trouble ahead.

Although business investment grew 3.4% during the quarter, this was driven by US aircraft imports in April.

Investments in ICT and machinery declined, indicating a possible slowdown.

The role of the Bank of England

Most analysts believe that the BoE is unlikely to place much weight on these numbers in its future decisions.

With inflation at 7.9%, above the 2% target, the Bank of England is expected to continue raising interest rates.

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Sacha Woodward

"Wannabe writer. Lifelong problem solver. Gamer. Incurable web guru. Professional music lover."

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