UK Inflation Seen Peaking At 3%: Bloomberg Survey
- UK inflation will likely peak at 3% in the fourth quarter of 2017, according to a Bloomberg survey of economists.
- The survey suggests economic growth will be weaker than previously thought.
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UK inflation will peak at 3% in the fourth quarter of this year, according to a Bloomberg survey of 51economists polled between June 9 and June 16. If right, this suggests no urgent need for the UK to increase interest rates – in line with the comments Tuesday by Bank of England Governor Mark Carney.
The survey also predicts a UK unemployment rate of 4.7%, just up from the current 4.6%, but is less optimistic about economic expansion. The consensus forecast is that GDP growth will be 1.6% in 2017, 1.3% in 2018 and 1.6% in 2019. Those numbers are all down from the previous poll a month ago, which put the 2017 figure at 1.7%, 2018 at 1.4% and 2019 at 2.0%.
The chances of a recession in the next 12 months are put at 23%.
Bloomberg’s survey comes as UK asset markets are buffeted by the Brexit negotiations that began yesterday, by the fraught domestic political situation, falling real wages and a relatively weak economic background. Meanwhile, British industry, while perhaps nervous because of Brexit, is benefiting in overseas markets from the fall in the British Pound after last year’s vote to leave the EU.
In London Tuesday, the FTSE 100 index was up 0.27% at 7,544 mid-morning, helped by the weakness of the British Pound after Carney’s comments in his Mansion House speech. At the same venue, UK Chancellor of the Exchequer Philip Hammond pressed the case for a soft Brexit that would avoid a “cliff edge” for British industry as the country negotiates the terms of its departure from the EU.
Chart: FTSE 100 Daily Timeframe (2017 to Date)
--- Written by Martin Essex, Analyst and Editor
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