The British economy is showing signs of stability: business activity in August reached its highest level since the summer of 2024. The growth was primarily driven by the service sector, where high demand has become the main driver of recovery. Fears of a recession may ease under these conditions, which is a positive signal for the government. However, inflationary pressures persist: companies continue to pass on costs to consumers, including the recent increase in national insurance contributions. At the same time, steady demand allows businesses to successfully implement price increases. Analysts emphasize that consumers' willingness to put up with price increases is surprising amid complaints about inflation. This may indicate the consolidation of inflation expectations, creating a challenge for the Bank of England. The BoE recently lowered its base rate to 4%, but the policy remains tight. Experts expect further rate cuts, although the timing has not yet been determined. Against the background of differences with the Fed, where the discussion has shifted to the timing of policy easing, the divergence of approaches is able to support the pound sterling with the continued weakness of the dollar.
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