Rate hike delayed by growth slowdown

THE pound fell on fading hopes of an interest rate rise last night, after figures showed the economy had a slow start to 2018.

Britain notched up growth of 0.1pc in the first quarter as expansion was checked by a slump in construction and the ‘Beast from the East’ blizzards.

This is down from growth of 0.4pc in the final three months of 2017 and analysts think the Bank of England is unlikely to raise interest rates next month – a major change of heart from just last week, when markets were giving a rate rise a 90pc chance of happening. The pound was down more than 1pc against the dollar to below $1.38 for the first time since late February as traders fear they will be able to earn less from investments in sterling.

The quarter was particularly bleak for construction, which shrank by 3.3pc.

Chancellor Philip Hammond said the bad weather was partly to blame and added the economy remains strong.

And economists expect the weak growth to be a short-term blip. Wages are rising faster than inflation, ending a year-long squeeze, and this is likely to help growth in coming months.

Paul Hollingsworth of Capital Economics said: ‘This is probably the final nail in the coffin for the chance of an interest-rate hike in May.

‘This slow patch should prove to be transitory, if past experience is anything to go by.’

But analysts at Barclays still expect the Bank of England’s Monetary Policy Committee to put rates up on May 10 following its next meeting.