Ups and downs – but all in a good way.

It has been a good start to the year for the UK in economic terms. The latest figures and reports show that not only is inflation coming down but unemployment is also down, whilst IMF predictions suggest that the economy is certainly on the up.

Our recent article reported that inflation was down to 2.0%. News out today has now declared that the UK unemployment rate has dropped to 7.1%, very close to 7.0% - the point at which the Bank of England has indicated that it will consider raising interest rates.

The drop in unemployment was greater than analysts had expected, which obviously raises the possibility that interest rates might rise sooner than previously thought. Most experts had not expected the unemployment rate to hit 7% until much later this year.  

However, the latest minutes from the Bank of England's Monetary Policy Committee (MPC) suggest that the Bank will not be rushed into raising interest rates. With inflation getting back to the 2% target rate last month, the feeling is that cost pressures are not that great. With wages remaining subdued, the view of some experts is that raising interest rates too soon could choke off the consumer-led recovery.

Meanwhile, the International Monetary Fund (IMF) has sharply increased its growth forecast for the UK economy. It is now predicting that the economy will grow 2.4% this year, increasing its previous forecast of 1.9%. In 2015, it expects growth of 2.2%.

The IMF is forecasting that the UK will grow faster than any other major European economy – it expects the euro area as a whole to grow by 1%.   

The IMF also raised its global growth outlook a little - to 3.7%. It expects that the US will grow by 2.8% this year, an improvement on its previous estimate of 2.6% made in October. The IMF also upgraded its forecast for the Chinese economy to 7.5% this year.

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