LONDON (Agencies): The UK economy failed to grow between July and September, figures show, after a succession of interest rate rises.
The chancellor said higher rates were hitting growth, but added that the economy had performed better than expected this year. Forecasters suggest the economy is set to be stagnant for several months yet. Last week, the Bank of England said the UK was likely to see zero growth until 2025, although it is expected to avoid a recession. Up until September, the Bank of England had raised interest rates 14 times in a row to try to tame soaring price rises.
However, while raising rates can reduce inflation – the pace at which prices rise – it also affects economic growth by making it more expensive for consumers and businesses to borrow money. Interest rates are at a 15-year high of 5.25%, and are expected to remain high for some time. Bank governor Andrew Bailey said last week it was “much too early” to be considering rate cuts. Paul Dales, the chief UK economist at Capital Economics, said the latest data suggested “the drag from higher interest rates.
