22 Aug

Economic slowdown may raise interest rate cut prospect

Economic slowdown may raise interest rate cut prospect

New figures on the UK economy may indicate that a cut in interest rates will come sooner than expected.

The Office for National Statistics has revealed that the UK economy did not grow at all during the second quarter of 2008.

A previous figure of 0.2 per cent growth has been revised downwards to zero after further analysis of the data.

Construction, industrial production and household spending were all down, although the service sector continued to grow.

The indication that the economy is slowing more than previously anticipated may mean more downward pressure being placed on inflation, which could make it possible for the Bank of England's monetary policy committee (MPC) to cut interest rates sooner than expected.

In the minutes of the August MPC meeting published this week, it was stated that the projection of flat economic growth over the next few months is expected to cause lower inflation, although the MPC acknowledged this is not certain to happen.

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