UK Outlook – January 2025

Growth stalls despite fiscal loosening

We have revised down our GDP forecast for 2024 to 0.8%, from 1.1% previously, on foot of weaker activity over recent months. With the outlook for H1 this year looking softer we have also reduced our 2025 forecast, from 1.4% to 1.2%. We expect a rebound in H2 and our projection for 2026 is unchanged at 1.6%, though risks are to the downside. We expect employment to expand by 0.6% in 2025 and 0.9% in 2026. We have pushed up our unemployment projections slightly, to 4.6% in 2025 and 2026 (from 4.4% previously). Price pressures are proving a bit more sticky than expected and we have revised up our 2025 and 2026 inflation forecasts to 2.6% and 2.2% (from 2.4% and 2.0%). We expect the BoE to cut the policy rate to 3.75% by the end of 2025.

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Bank of Ireland UK Outlook January 2025