If nominal GDP growth is therefore zero, at a time when inflation is a positive number, that means the level of goods and services produced in the economy is declining, but that prices for goods and services has risen.
In an update to clients he says: “The base rate is at 5.25 per cent and has looked high relative to near-constant 0 per cent real growth; the GDP level of about £2.2tn (in 2019 money) has not changed for two years – in other words, real growth is at zero.
"Indeed, the real level is now below that of a year ago, not just two quarters. The high base rate was justifiable only when total current activity growth (‘nominal’ which includes inflation) was growing strongly. Now, nominal growth is barely changing and has been nearly the same level for the past three quarters."
He does however agree with Miller’s view that any tax cuts announced in a forthcoming Budget could mean a delay in rate cuts.
Gavyn Davies, chairman at Fulcrum Asset Management and a former chief economist at Goldman Sachs, says: “I think in the UK the interest rate outlook is more dependant on the outlook for inflation than it is the outlook for growth.”
But he expects this pattern of rate cuts taking longer than expected is something that is not unique to the UK.
He says he no longer expects global developed markets to cut in the first quarter of this year.
Davies says that recent commentary from US policymakers indicates that their intention to cut rates has not changed, but that the language now implies it will not happen until further into the future, due to inflation being more persistent than had been expected.
He says rates could be cut in the eurozone before they are in the US, as economic data remains very negative now, and he expects the GDP growth number to remain very meagre throughout the year.
Miller is also very cautious on the outlook for the eurozone, noting the previous manufacturing-led economic model is “structurally” challenged as a consequence of Chinese manufacturers now focusing on selling goods into Europe at prices that may be 20 per cent cheaper than the prices levied by European manufacturers.
Mentel says recent economic data from the eurozone indicates expected levels of growth and inflation have both slowed.
Simon French, chief economist at Panmure Gordon, wrote on social media site X that he believes the impact of lower energy bills and other deflationary trends in the UK economy are likely to mean that inflation comes down to around the BoE’s 2 per cent target in the fourth quarter of this year.
