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Turning the corner

We think the economy has turned a corner and that GDP growth will beat the consensus forecast by accelerating from 1.0% this year to 1.8% next year. Of course, the lingering uncertainty over the UK’s future relationship with the EU will hold back business investment this year. But if we are right in assuming that the UK and the EU will take steps to prevent a disruptive change in their relationship on 31st December 2020, then business investment should strengthen next year. And we think that a loosening in fiscal policy worth up to 1% of GDP will soon start to boost GDP growth. While there remains a chance that interest rates will be cut this year, we think it is more likely that the markets are caught out by rates being left at 0.75% this year and being increased to 1.00% in 2021.

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