Chancellor predicts 'interest rate cuts this summer' but refuses to say when - as UK economy comes out of recession

10 May 2024, 08:36 | Updated: 10 May 2024, 08:50

Watch Again: Nick Ferrari is joined by Chancellor Jeremy Hunt | 10/05/24

By Emma Soteriou

Chancellor Jeremy Hunt has predicted that interest rate cuts could happen this summer but has refused to say when.

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Speaking to LBC's Nick Ferrari at Breakfast, Mr Hunt said he believed a drop in interest rates could be just months away.

It came after he warned the Bank of England that cutting rates too quickly could cause inflation to spike again.

"I wouldn’t like to predict an exact time but the Bank of England governor says he is optimistic that we are on the right track," the Chancellor said.

"It will be a massive relief for families with mortgages if we can bring them down so I hope that turns out to be the case."

It was confirmed on Friday morning that the UK had come out of a recession after the economy grew in the first quarter of 2024.

GDP is estimated to have risen by 0.6% between January and March, the Office for National Statistics said.

It represented the strongest quarterly growth since the last quarter of 2021.

Read more: UK escapes recession as economy grows 0.6% in first quarter of 2024

GDP is estimated to have risen by 0.6% between January and March.
GDP is estimated to have risen by 0.6% between January and March. Picture: ONS

The performance was particularly driven by improvements in the services and production sectors, which grew by 0.7% and 0.8% respectively.

It came after two quarters of decline - which represented a technical recession - in the back half of 2023.

There was notable growth for the human health and social services sector, administrative and support services, as well as for wholesale and retail firms.

However, construction output fell 0.4% during the month. It represented a significant reduction in decline after a 2% fall in February.

Read more: Chancellor warns Bank of England against cutting interest rates too quickly warning inflation could spike again

Read more: Tories criticised for ‘appalling mismanagement of economy’ as mortgage rates set to rise after interest rates held

Andrew Bailey, Governor of the Bank of England, speaking during the Monetary Policy Report press conference
Andrew Bailey, Governor of the Bank of England, speaking during the Monetary Policy Report press conference. Picture: Alamy

Responding to the figures, Mr Hunt said: "There is no doubt it has been a difficult few years, but today's growth figures are proof that the economy is returning to full health for the first time since the pandemic.

"We're growing this year and have the best outlook among European G7 countries over the next six years, with wages growing faster than inflation, energy prices falling and tax cuts worth £900 to the average worker hitting bank accounts."

ONS director of economic statistics Liz McKeown said: "After two quarters of contraction, the UK economy returned to positive growth in the first three months of this year.

"There was broad-based strength across the service industries with retail, public transport and haulage, and health all performing well.

"Car manufacturers also had a good quarter. These were only a little offset by another weak quarter for construction."

Labour's shadow chancellor Rachel Reeves said: "This is no time for Conservative ministers to be doing a victory lap and telling the British people that they have never had it so good.

"The economy is still £300 smaller per person than when Rishi Sunak became Prime Minister."

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