HSBC breaks rank on UK economic forecast
UK banking giant HSBC has today broken rank with regards to forecast economic growth for the UK economy with a suggestion that 2010 will see a 2.2% increase in the UK economy on a "modest" recovery in consumer spending. This is well above the Treasury's estimate of 1.25% and more in line with the Bank of England which has been more positive than most on the UK economy. However, there will be drawbacks to a potential recovery in the UK economy!
HSBC also believes that the Bank of England will be forced to increase UK base rates to 1% before June 2010 and to 2% by the end of 2010. Contrary to speculation in the weekend press, HSBC also believes that the Bank of England will terminate the quantitative easing program in February and leave the UK economy to "fend for itself". So how will the UK economy perform in 2010?
The very fact that today's HSBC forecast is very different to that issued by the UK Treasury and more in line with the Bank of England, at least prior to this weekend's speculation, shows perfectly how difficult it is to forecast the performance of the UK economy in the short to medium term. Nobody really knows how the economy will perform in 2010 and what will be the catalyst to a full recovery.
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