The United Kingdom (UK) economy suddenly contracted in the first month of this year, increasing pressure on the Bank of England to continue to relax the monetary policy.
Data released on Friday by the National Statistics Office showed that the UK Gross Domestic Product (GDP) declined by 0.1% in January, a sudden decrease compared to the 0.4% growth recorded in December, and was lower than the 0.1% growth expected.
Annually, the UK economy only grew by 1.0% in January, declining from the 1.5% growth rate seen in the last month of last year.
The UK economy previously recorded a growth of 0.1% between October and December, exceeding the 0.1% depreciation expected last month. This is a bit of a concern that the world's sixth largest economy will experience a recession in early 2025.
However, it is clear that economic growth is still difficult to achieve, as the data released in February shows that the per capita GDP taking into account the population increases by 0.1% in the last three months of 2024, as well as the whole year.
Bank of England lowered interest rates in early February by 25 basic points, making the basis 4.5% from 4.75%. This step continues the trend of reducing loan costs after interest rates reached the highest level within 16 years.
However, the latest UK inflation data for 12 months to January 2025 shows that the Consumer Price Index (CPI) inflation rate is 3.0%.
This was 0.5% higher than December data and 1.0% higher than Bank of England's target of 2.0%, reflecting the central bank's difficulty in balancing inflation with weakening economies.
At its last meeting, the Bank of England lowered the growth forecast for 2025, reducing its forecast from 1.5% to just 0.75%.
