FTSE 100 Drifts Lower On Rate Rise Buzz

FTSE 100 Drifts Lower On Rate Rise Buzz

"Growth in the third quarter continued at a similar rate as seen in the first half of the year", said Darren Morgan, head of national accounts at the Office for National Statistics, which published the data. However, its percentage contribution to GDP means its impact on overall growth in the quarter was limited.

The British pound rose shortly after today's growth report, going up 0.25 percent against the U.S. dollar to $1.317.

The lion's share of the expansion came from the services and manufacturing industries, while the construction sector fell into recession.

"The figure may also provide support to the Governor of the Bank of England who is looking to raise interest rates this year and a stronger United Kingdom economy should increase the likelihood of this happening".

Year-on-year growth is at 1.5%, according to the ONS.

"There is also nothing in these figures that would cause the MPC (Monetary Policy Committee) to hold off on the quarter point interest rate rise that markets expect from their meeting next week".

Responding to the GDP announcement, the Chancellor said: "We have a successful and resilient economy which is supporting a record number of people in employment".

Over the past 12 months GDP grew by 1.5pc, the joint-slowest rate since 2013.

A rate rise by the BoE would act to curb inflation.

"The Bank argues that inflationary pressures could rise sharply if not checked by higher interest rates, and that the current low unemployment rate could lead to much faster wage growth".

Recent months have seen growing speculation that a rate rise could be imminent, with many economists predicting that we may see an increase as early as November. So, while symbolically important, it's unlikely the first rate hike in ten years will be catastrophic for the economy. It is possible that if inflation proves stubborn, unemployment continues to remain low, wages start to increase more rapidly and growth strengthens, then rates may rise a little quicker than markets now expect.

"If the MPC doesn't raise interest rates on 2 November following this preliminary GDP estimate, Mark Carney will be branded as the central banker who cried wolf once too often".

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