We’ve become more concerned about the outlook for the economy due to the drags from higher businesses taxes and the more uncertain global backdrop being bigger than we thought and the boost from government spending being smaller. Our forecasts that GDP will rise by 0.8% this year and 1.2% next year are below the consensus forecasts. The weak economy will eventually contribute to inflation falling back to the 2.0% target in 2026 and interest rates being cut from 4.50% now to 3.50% rather than to 4.00% as investors expect. A rebound in CPI inflation this year to 3.5% and the fears of second-round inflation effects, though, mean the Bank of England will pause the rate cutting cycle in the coming months.
Economists from our macro and markets teams will be discussing what Trump's latest tariffs announcements mean for economies and markets throughout the Americas, Europe and Asia in a special online briefing on Thursday 3rd April at 9am BST and 1pm BST (register here for 9am and here for 3pm).
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