United Kingdom growth fuels speculation of interest rate rise

Mark Carney will now come under pressure to raise interest rates

It may not be a great picture either; economists predict that GDP rose by just 0.3% during the quarter, significantly below the long-term trend growth.

However, 0.4 percent is a still below the U.K.'s long-term growth rate, as data suggest 2017 could be the poorest growth year for the British economy since the financial crisis in 2007-2008.

GDP grew faster than expected in the third quarter.

"Despite today's marginal improvement, growth has been relatively lacklustre this year".

However, the construction industry, often seen as a bellwether for the broader economy, contracted for the second quarter in a row.

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Sterling shot up following the release, rising more than 0.3% against both the USA dollar and the euro to 1.317 and 1.119, respectively.

Shilen Shah, Bond Strategist at Investec Wealth & Investment, said: "Third quarter UK GDP accelerated to 0.4%, above the consensus figure of 0.3%, with some indications that the dominant services sector continues to be in expansionary territory".

The figure will help boost speculation that the Bank of England may look to raise interest rates at its monetary policy meeting next week.

The UK economy beat forecasts to grow by 0.4% in Q3, according to the latest figures from the Office for National Statistics (ONS), further increasing the likelihood of a Bank of England interest rate rise next Thursday.

The weakened pound has driven up the cost of imports which has translated into higher shop prices, helping inflation rise to a five-and-a-half-year high of 3 per cent last month.

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It is worth noting though that Mark Carney has previously hinted that a rate rise may be on the cards, only for rates to then hold steady, so there are certainly no guarantees that an increase will happen.

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

"A slightly improved performance from the United Kingdom economy in Q3, with output growing by 0.4%".

A rise would quickly hit those on tracker mortgages, which follow at a fixed margin above or below the BoE base rate. "I expect the Bank to proceed with caution from here". "The key for investors will be to be discerning between those companies who will benefit from rising interest rates and stronger growth and those, particularly those with high levels of debt, for who increased rates may be more problematic".

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The government's announcement drew both praises and criticism even as the Hurriyat Conferences did not react immediately. So for now, well take what we can get. "More important than the person is the mandate and absence of pre-conditions".

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