The last month has seen the first tentative signs that economic activity has started to slow. The business surveys appear to have peaked while a further fall in mortgage approvals suggested that housing activity has weakened. (See Chart.) Part of this easing in overall activity may reflect the financial market disruptions. But it is more likely that the interest rates rises seen over the last year have started to take their toll. We now think that GDP growth will slow sharply, from 3% this year to around 2% next year, and that interest rates are likely to fall to around 5% by the end of 2008.
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