Run of Bad Economic Data Brings Relief to Markets and Borrowers

By Evans Momodu
2 minute digest

A string of disappointing economic indicators has paradoxically provided some good news for UK borrowers and the broader economy.

Market expectations now point to three interest rate cuts by the Bank of England in 2025, according to data from the London Stock Exchange Group.

Earlier in the week, traders had anticipated just two rate cuts for the year, but this outlook shifted following the release of official statistics showing a decline in retail sales during December—a crucial month for consumer spending.

This contraction raises the likelihood of a small GDP drop in the final quarter of 2024, potentially marking six months of stagnant economic growth under the Labour government.

The economic slowdown has eased market turbulence and lowered pressure on Chancellor Rachel Reeves, as borrowing costs are expected to fall faster than previously forecast.

The Bank of England is now expected to reduce rates by 0.25 percentage points during three of its eight meetings in 2025, offering relief to mortgage holders and businesses.

This turn of events aligns with the government’s focus on promoting economic growth but underscores the challenges faced in achieving a robust recovery.
Source: Sky news