The surprise indicates the Bank of England’s policy is still lagging.
The UK economy shrank by less than expected in May, with GDP falling 0.1% versus expectations of a 0.3% decline. While a lot of this contraction was most likely down to the additional bank holiday around the King’s coronation and the striking workforce in the public sector, it is a little surprising to see an economy doing less badly than predicted. The Bank of England (BoE) wants to see a contraction as direct evidence its ‘war on inflation’ strategy is working and will be a little confused that its policy to date is still lagging.
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