Goldman Sachs – UK Economics, 2024

Goldman Sachs predicts that the UK's economic outlook is improving and aligning with other advanced economies. The country has shown surprising growth resilience, avoiding a recession, and is expected to have modest growth of 0.6% in 2024. The labour market has also rebalanced, with the gap between jobs and workers shrinking more than in the US or Euro area. Wage growth is slowing down, with predictions of it further cooling to around 4.5% by the end of next year. Inflation metrics have weakened, with core inflation decreasing from 9% to 4% and expected to reach 2.8% by the end of 2024. The Bank of England (BoE) is expected to keep interest rates steady, similar to the Federal Reserve and the European Central Bank. However, the BoE may not consider rate cuts despite sluggish growth due to continued above-target inflation. It is anticipated that the BoE will lower the Bank Rate in the third quarter of 2024, followed by quarterly 25 basis point reductions until reaching a terminal rate of 3%. The UK's economy still faces challenges compared to other advanced economies, with weaker growth expected and constraints from long-term sickness and changing immigration patterns. Fiscal vulnerabilities, including inflation-indexed bonds and potential losses from the BoE's Asset Purchase Facility, may limit fiscal support next year.