General
Britain’s Economy Is ‘Bumbling’ Into the New Year
Stubborn inflation, tax rises and high interest rates makes it difficult for many to muster optimism, at least in the short term.
It’s a somber end to the year in Britain, dampened by a string of disappointing economic news. Inflation has jumped, the economy has stagnated and consumer confidence surveys are deeply downbeat.
The year started with an unexpectedly strong rebound out of a recession, anticipation of interest rate cuts and the prospects for a new government that vowed to restore sustainable economic growth. Voters put the Labour Party in charge in July, ejecting the Conservative Party from power after 14 years.
But optimism has been difficult to muster lately. Labour’s first budget included larger-than-expected spending and investment plans, offering some stimulus to the economy, but also raised taxes on businesses. And while interest rates are coming down, the pace has been slow.
On Thursday, the Bank of England decided to hold interest rates at 4.75 percent. The announcement came the day after data showed that inflation accelerated to 2.6 percent in November, from 2.3 percent the previous month, moving further away from the bank’s 2 percent target.
“We think a gradual approach to future interest rate cuts remains right, but with the heightened uncertainty in the economy we can’t commit to when or by how much we will cut rates in the coming year,” Andrew Bailey, the governor of the central bank, said in a statement.
Since the summer, the Bank of England cut interest rates by half a percentage point. By comparison, the U.S. Federal Reserve and the European Central Bank both lowered rates by a full point over that period.
