The Bank of England is expected to raise its forecast for the UK economy on Thursday, with the vaccination schedule and the easing of the lockdown helping to boost Britain’s recovery.
The Bank’s policymakers are expected to “dramatically” improve their growth prospects as they keep interest rates at 0.1%, experts say.
While the latest lockdown is expected to see gross domestic product (GDP) – a key measure of the economy – plummet once again between January and March, the blow is believed to be much smaller than initially feared. because the economy will become more and more resilient.
GDP rose 0.4% in February, following a 2.2% drop in January, even though England was still in full lockdown.
Economists also believe the economy has already got off to a good start in the second quarter with the reopening of non-essential stores and outdoor restaurants on April 12.
While all eyes were on the possibility of negative interest rates last year, attention has now turned to when the Bank’s Monetary Policy Committee (MPC) might seek to lift them amid the concerns about rising inflation.
Some experts have said the Bank may even consider signaling plans to cut its massive £ 895 billion quantitative easing (QE) program at the May meeting.
Howard Archer, chief economic adviser to the EY Item Club, said: “It seems very likely that the Bank of England will significantly revise its GDP growth forecast for the UK economy in 2021 upwards, although it may partly offset this by lowering expected growth in 2022, and also sharply its unemployment projections. “
Recent official figures show the UK unemployment rate unexpectedly fell to 4.9% between December and February, as businesses start hiring again as the economy opens up.
“While it still seems likely that some jobs will be lost when the holiday program ends in September, it also looks like the peak in the unemployment rate will be lower than the Bank of England previously feared,” M said. Archer.
The Bank predicted in February that GDP would grow 5% this year and 7.25% in 2022 after GDP fell 9.8% in 2020.
He predicted unemployment would peak at 7.8% after the holidays ended, but the scheme was later extended in the March budget.
The EY Item Club estimates that growth could reach 6.8% in 2021, which would be the best year of growth since World War II.
It also cut its peak unemployment forecast to 5.8%.
Inflation nearly doubled to 0.7% in March from 0.4% in February, but Mr Archer does not expect rates or QE to change in 2021 and has said inflation should be maintained at the 2% target before considering tightening monetary policy.
“The Bank of England is increasingly likely to tighten monetary policy in 2022, although for now the start of 2023 is more likely,” he said.