Traders lift bets on UK interest rate cuts in 2024 after economy shrinks in October – as it happened

Office workers and commuters walking through Canary Wharf in London during the morning rush hour. Photograph: Victoria Jones/PA

4.05pm GMT

Closing post

Time to recap…

City investors are pricing in a full percentage point of cuts to UK interest rates next year, after Britain’s economy shrank in October.

The money markets show that UK interest rates are forecast to have fallen to 4.25% by December 2024, down from 5.25% today – as the Bank of England prepares to reveal its final interest rate decision of the year.

Traders ramped up rate-cut expectations after UK GDP shrank by 0.3% in October, news which also knocked the pound by a third of a cent against the US dollar.

The fall in GDP sparked new concerns that the UK could be sliding into recession, with Labour’s shadow chancellor, Rachel Reeves, warning that the economy was going backwards.

Chancellor Jeremy Hunt said it was “inevitable GDP will be subdued” while interest rates were high to fight inflation.

GDP was flat (0.0% growth) in the three months to October.

In the month of October, GDP fell 0.3%.

➡️ https://t.co/k1USftqo5r pic.twitter.com/OUdm9sRpaO

— Office for National Statistics (ONS) (@ONS) December 13, 2023

Goldman Sachs and J.P.Morgan have both cut their forecast for Britain’s annual economic growth this year to just 0.5%, down from 0.6% before.

All sections of the UK economy shrank in October, with output in the “motion picture, video and TV production” subsector declining sharply.

Here’s the full story:

And here’s the rest of today’s business and finance news so far:

3.45pm GMT

Analysis:Signals are flashing red for Rishi Sunak’s economic growth pledge

The construction industry faces a disastrous 2024 if the cost of borrowing remains high, my colleague Phillip Inman warns.

Professions that depend on the property market are likewise going to be hard hit, he points out, adding:

The October GDP figures show legal services contracted amid a sharp slowdown in the sale of commercial and residential properties.

No doubt the Bank of England’s monetary policy committee will view the monthly GDP drop as a foretaste of recession with some scepticism and will vote on Thursday to keep interest rates at 5.25%.

Eradicating inflation is likely to be worth a shallow recession in the view of most MPC members. It means a shallow recession is what we might get.