City braces for final economic figures before Christmas break

The Treasury said it wanted to avoid imposing "additional upfront financial costs for banks". (Photo by Chris J Ratcliffe/Getty Images)
The Treasury said it wanted to avoid imposing "additional upfront financial costs for banks". (Photo by Chris J Ratcliffe/Getty Images)

The City is bracing for a string of big economic announcements in what will be the final busy week of news before the Christmas break.

Tomorrow, fresh gross domestic product (GDP) figures from the Office for National Statistics (ONS) are expected to show the UK economy recovered in October.

But, the 0.4 per cent growth pencilled in by markets will have been artificially driven by the lost working day in September to mark The Queen’s funeral.

Despite the rise, analysts reckon the economy is on course to stumble into a long slump.

“There are mounting signs that the UK is already in a recession with survey data continuing to paint a bleaker picture of the economic outlook,” Sanjay Raja, senior economist at Deutsche Bank, said.

Fresh inflation figures on Wednesday “will mark a symbolic era of the post- pandemic inflation wave,” he added, betting that the 10.9 per cent figure – down from a current 41 year high rate of 11.1 per cent – will signal it has passed its peak.

Although this year’s rapid inflation surge is finally cooling, on Thursday, the Bank of England is set to heap more pressure on households and businesses by hiking interest rates 50 basis points to 3.5 per cent, the highest level since October 2008.

That would mark a slowdown from the Bank’s 75 basis point rise in November, the biggest move since the 1980s.

The Bank of England has lifted interest rates rapidly this year to three per cent.
Source: Bank of England

However, analysts said there is a chance governor Andrew Bailey and the rest of the monetary policy committee will move forcefully again to prevent high inflation expectations sparking an upward price spiral.

Investment bank Nomura said “it would be better” for the Bank to get to the end of this current rate hike cycle quicker.

“If you know that rates need to be higher than they are today to control inflation, why delay?,” the firm’s analysts said.

Across the pond, the US Federal Reserve will also slow down to a 50 basis point rise on Wednesday after four successive jumbo rises.

“The majority of the economic data would support a slower pace of rate hikes, particularly the latest cooler-than-expected inflation report,” Ellie Henderson, economist at Investec, said.

The European Central Bank is also expected to ease the pace of rate rises on Thursday.

UK jobs figures tomorrow are likely to reveal pay is still lagging far behind price rises. The economy is set to suffer its worst recession in a century next year, driven by consumers cutting spending in response to their real incomes falling rapidly.­