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Output had risen 0.5% in June, and the economy grew 0.2% over the three months to the end of July. The data underlined signs that Britain's economy is weakening, perhaps by more than the Bank of England had expected ahead of its September interest rate meeting. "Either way, it does suggest that higher interest rates and sticky inflation are having a more significant effect on the economy." Unusually wet weather in July hurt output at retailers and in the construction sector, which fell 0.5%, the ONS said. Wednesday's data does not include recent, substantial upward revisions to the performance of Britain's economy up to the end of 2021.

Persons: Toby Melville, Sterling, BoE, Neil Birrell, Samuel Tombs, Andy Bruce, David Milliken, William James, Alison Williams Organizations: St Thomas ' Hospital, REUTERS, LONDON, National Statistics, Bank of England, Premier Miton, ONS, Thomson Locations: St, London, Britain, England

Workers walk through the Canary Wharf financial district, ahead of a Bank of England decision on interest rate changes, in London, Britain, August 3, 2023. The unemployment rate rose, the number of people in work fell sharply and vacancies dipped below 1 million for the first time in two years, the Office for National Statistics (ONS) said on Tuesday. Yet if incoming data doesn't turn definitively, another hike to a terminal rate of 5.75% is absolutely on the table." The unemployment rate rose to 4.3% in the three months to July from 4.2% a month earlier, its highest since the three months to the end of September 2021, the ONS said. Including bonuses, pay rose by 8.5% compared with the 8.2% consensus, boosted in part by backdated pay for healthcare workers.

Persons: Toby Melville, BoE, Hugh Gimber, they've, Andrew Bailey, Jeremy Hunt, Andy Bruce, David Milliken, Sachin Ravikumar, David Holmes Organizations: Bank of, REUTERS, Bank of England, National Statistics, Morgan Asset Management, Thomson Locations: Bank of England, London, Britain

Official data on Friday showed the economy grew 0.2% in the second quarter, against the consensus for a flat reading in a Reuters poll of economists. The strong showing bolstered bets that the BoE would keep on raising interest rates, given the central bank stressed this month that resilience in the economy was one of the factors that would underpin its judgement. The central bank itself had pencilled in growth of 0.1% for the second quarter. "With much of the drag from higher interest rates still to come, we are sticking to our below-consensus forecast that the UK is heading for a mild recession later this year," said economist Ruth Gregory from consultancy Capital Economics. Reporting by Andy Bruce and David Milliken; editing by William James, Kate Holton and Christina FincherOur Standards: The Thomson Reuters Trust Principles.

Persons: Sterling, BoE, Neil Birrell, Jeremy Hunt, Ruth Gregory, Andy Bruce, David Milliken, William James, Kate Holton, Christina Fincher Organizations: Bank of England, U.S ., Reuters, Bank of, Miton, National Statistics, Manufacturing, Reuters Graphics, Capital Economics, Thomson Locations: Bank of England, Britain, Germany, France, Italy, United States

A Reuters poll of economists had pointed to approvals of 49,000, after 51,143 mortgages were approved in May. The value of net mortgage lending for the second quarter as a whole fell compared with the first quarter - the first quarterly contraction since records began in 1987. The BoE is expected to raise interest rates to 5.25% on Thursday from 5.0%, which would be the highest Bank Rate since 2008. "Looking ahead, growth in households' real disposable incomes will be weighed down by mortgage refinancing," said Samuel Tombs, chief UK economist at consultancy Pantheon Macroeconomics. The BoE reported a 1.661 billion pound ($2.13 billion) monthly increase in net consumer lending June, the largest such increase since April 2018.

Persons: Banks, Liz Truss, BoE, Thomas Pugh, Samuel Tombs, Andy Bruce, David Milliken, Sarah Young, Christina Fincher Organizations: Bank of, RSM, Thomson

Inflation, which hit a 41-year high of 11.1% in October, continued to eat into the spending power of workers whose pay is rising by less. Britain's headline inflation rate is now the highest in western Europe and compares with an average of 6.9% in the euro zone and 5.0% in the United States. Austria recorded a higher inflation rate than Britain in February. Reuters GraphicsPOLITICAL PRESSUREHigh inflation is a problem for Britain's government as well as the BoE, which forecast in February that inflation would be below 4% by the end of the year. Producer price inflation - which measures changes in prices charged and paid by manufacturers and often leads changes in CPI - tumbled in March due to lower oil prices.

REUTERS/Henry NichollsLONDON, April 19 (Reuters) - Britain now has western Europe's highest rate of consumer price inflation after it fell by less than expected in March to 10.1% from February's 10.4%, official data showed on Wednesday. Despite falling in March, Britain's inflation rate was the highest in western Europe and the only country in the region to post a double-digit number for last month, after Austria recorded a higher inflation rate in February. Last month the BoE said it expected inflation to "fall significantly" in the second quarter. In February, the BoE had forecast March inflation of 9.2%. Inflation in prices charged by manufacturers fell sharply in March to its lowest since October 2021 at 8.7%, down from 11.9% in February, largely reflecting a drop in oil prices.

Commercial banks are paid interest on the reserves by the BoE at whatever is the BoE's current interest rate - just 0.1% a year ago, but 3% now and likely to rise further. But now the BoE makes losses because the interest paid on reserves exceeds income from its QE bond holdings. Bailey said the current structure of paying interest fully on all reserves was the simplest way for the BoE to ensure its interest rate changes are transmitted through the financial system. He disagreed with descriptions that this was free money for banks, since they had their own funding costs to meet that also rose with central bank interest rates. Another former BoE rate-setter, Gertjan Vlieghe, on Thursday said it would be a "disaster" to stop paying interest on reserves, even partially - akin to a default on debt.

LONDON, Nov 24 (Reuters) - The Bank of England will not accept interference with the system of paying interest to banks from reserves issued by the central bank, BoE Chief Economist Huw Pill said on Thursday, pushing back against talk that change is needed. Some former BoE officials have said the central bank should alter its system of paying interest to banks on its 950 billion pounds ($1.15 trillion) of reserves, the vast majority of which the BoE issued to finance its quantitative easing programme. Pill's comments are likely to be interpreted as a warning to the government, which ultimately decides how interest on reserves are paid. Commercial banks are paid interest on the reserves by the BoE at whatever is the BoE's current interest rate - just 0.1% a year ago, but 3% now and likely to rise further. However, another former BoE rate-setter, Gertjan Vlieghe, said on Thursday it would be a "disaster" to stop paying interest on reserves, even partially - citing recent concerns about Britain's institutional credibility.

Sunak told business leaders at a Confederation of British Industry (CBI) conference he was "unequivocal" that Britain should pursue its own agenda on regulation and migration. "On trade, let me be unequivocal about this: under my leadership, the United Kingdom will not pursue any relationship with Europe that relies on alignment with EU laws," Sunak said. [1/3] British Prime Minister Rishi Sunak speaks during the Confederation of Biritish Industry (CBI) conference in Birmingham, Britain November 21, 2022. And having the regulatory freedom to do that is an important opportunity of Brexit," Sunak said. "Let's have economic migration in areas where we aren't going to get the people and skills at home anytime soon.

Other media said Truss would allow corporation tax to rise in April, reversing a decision to freeze it that was part of Kwarteng's "mini-budget" announced last month. Yields for index-linked gilts also fell sharply. Bets on a peak for rates to hit 5.5% next year were no longer fully priced in. They have gathered pace as investors offered more bonds to the central bank with the scheme nearing its end. LDI funds had been hit hard by the record slump in long-dated gilt prices after Kwarteng's mini-budget.

"Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability," the BoE warned. One source at the Treasury said Kwarteng would not resign, and the government would not reverse its policy. A second person familiar with the situation said Truss still backed Kwarteng and they would announce further economic reforms soon. One source at the meeting said Kwarteng had asked the assembled finance bosses what they could do to calm markets. U.S. bond giant PIMCO said it would have less confidence in sterling than it did before last Friday's announcement.

"Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability," the British central bank said. By 2:48pm (1348 GMT) it was trading down 0.5% at $1.0679, a fall of 12% in the last three months. The BoE said it would return to its plan to sell bonds and its launch was only postponed until the end of October. RESTORE ORDEROn Monday the BoE said it would not hesitate to raise interest rates and was monitoring markets "very closely". But the slide in bond prices continued unabated on Wednesday, prompting the BoE to make its move.

"Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability," the central bank said in a statement that immediately eased pressures on soaring British government bond yields. The Bank of England said on Monday it would not hesitate to raise interest rates and was monitoring markets "very closely". Earlier on Wednesday 30-year British government bond yields rose above 5% for the first time since 2002. "An irresponsible, destructive fiscal policy." In his remarks on Tuesday, BoE Chief Economist Pill said financial market upheaval would have a big impact on the economy and would be factored into the Bank's next forecasts.

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