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Nov 29 (Reuters) – JP Morgan said on Tuesday it expects the UK economy to contract next year as it enters a long period of stagnation in the face of rising gas prices, slowing global growth and tightening economic conditions.
The brokerage sees UK gross domestic product falling by 0.6% in 2023, compared with growth of 4.3% this year.
According to JP Morgan, tight monetary and fiscal policy amid the scars of both the pandemic and Brexit, which are already weighing on UK growth, will continue to distort supply and demand.
As the UK battles decades-high inflation, the Bank of England (BOE) raised its bank rate by 75 basis points earlier this month, with a Reuters poll pointing to a more modest 50 bps hike at its next meeting in December, taking it to 3.50. is % by the end of this year.
At the Nov. 3 meeting, BOE Governor Andrew Bailey told investors, who were pricing in a peak of 4.70%, that their rate hike bets were looking too big.
JP Morgan sees the BOE’s bank rate rise to 4.25% in the first quarter of next year, noting that monetary policy is set to tighten with delay, and monetary tightening “will take longer than in the past”.
British Prime Minister Rishi Sunak on Monday pushed back against calls from companies to liberalize immigration to improve trade ties with the European Union and boost growth, saying the country has already benefited from Brexit.
Earlier this month, Barclays said it expected developed economies to contract in 2023 with recessions in the UK and euro area starting in the third and fourth quarters respectively, while Goldman Sachs downgraded Britain’s economic outlook and warned of a deeper recession. 2023.
Reporting by Reshma Rocky George in Bengaluru; Editing by Shaunak Dasgupta
Our Standards: The Thomson Reuters Trust Principles.
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