Goldman Sachs has raised its forecast for UK gross domestic product growth for 2025 and 2026 by 0.1%. Commenting on their decision, the strategists pointed to an acceleration in demand growth in the short term.
"Increased demand is likely to lead to modest wage growth and inflation, but the related changes suggest that the effects on the Bank of England are likely to be limited," Goldman Sachs said.
Meanwhile, amid news that the U.K.'s opposition Labor Party won a huge parliamentary majority in the country's general election, analysts are now discussing what this might mean for the Bank of England and interest rate expectations. Deutsche Bank experts said that the victory of the Labor Party probably will not significantly affect the prospects for monetary policy – at least at this stage. "We expect Labour to a) set out a cautious fiscal path, with some modest increases to 2025/26 departmental spending alongside key policy objectives (such as its Green Prosperity Plan), which will largely be offset by tax hikes. There are risks to this view, however. Further net fiscal easing at the Autumn Budget, than we've pencilled in, could lead to a more cautious and gradual rate cut path relative to our base – particularly if growth continues to converge back to potential," Deutsche Bank added.