In a report accompanying Chancellor Jeremy Hunt's ambitious Autumn Statement, the Office of Budget Responsibility (OBR) has revised the UK's economic growth forecast, indicating a modest growth of 0.6% this year instead of the anticipated 0.2% contraction. Looking ahead, the OBR projects growth rates of 0.7% in 2024 and 1.4% in 2025.
Living standards are expected to dip significantly by 3.5% in 2024/25 while unemployment is set to peak at 4.6% in the Q2 of 2025, reflecting slowed GDP growth and increased spare capacity. The Chancellor's response to these challenges includes a £27bn fiscal windfall, primarily allocated to National Insurance Contributions (NIC) cuts and welfare reforms.
While the Bank of England has maintained a cautious stance on interest rates, holding them at 5.25%, governor Andrew Bailey suggests further rate hikes are more likely than cuts. The Bank Rate is expected to peak slightly above 5.25% before gradually falling back to 4% by 2029.
In summary, the OBR's downgraded growth outlook, coupled with fiscal measures, reflects the complexities the UK economy faces, prompting the Government to respond with strategies that help the nation navigate uncertainties in the coming years.
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