Despite persistent inflation, the U.K. economy has emerged from a shallow recession in the second half of 2023, with a growth rate of 0.6% in the first quarter, surpassing expectations of 0.4%. The production sector expanded by 0.8% from January to March, while construction experienced a decline of 0.9%. However, the overall economic growth for the month of March was at only 0.4%, following a 0.2% expansion in February.
The Bank of England’s Monetary Policy Committee has stated that indicators of inflation persisting at elevated levels have led to the decision to keep the main interest rate at 5.25%. While headline inflation is expected to remain close to 2% in the short term, the central bank forecasts that it will increase later in the year when the effects of a sharp decline in energy prices wear off.