The prospect of early interest rate cuts this year across leading industrialised nations received a blow on Thursday after figures showed the US economy grew at a faster pace than expected last year. A stronger than forecast increase in US gross domestic product (GDP) of 3.3% last year dented hopes in the US, while the European Central Bank hinted at delays to the first cut in the cost of borrowing. Meanwhile a strong start to the year by the UK economy appeared to give the Bank of England, which meets next week to decide its next move on interest rates, a reason to hold at the current level of 5.25% into the summer. After leaving interest rates unchanged on Thursday, the president of the ECB, Christine Lagarde, warned that it was “premature to discuss rate cuts” as she insisted future decisions would depend on incoming data. Investors cut their forecasts for the total level of rate cuts by the ECB this year to 1.3 percentage points from 1.5 percentage points two weeks ago. The central bank said inflation across the eurozone was slowly trending downwards. But Lagarde added: “We need to be further along the disinflation process to be confident that inflation will be at target – sustainably so.” Germany has fallen into recession and France has struggled to grow over the last year, prompting calls for interest rates cuts to boost economic growth. Michael Hewson, chief market strategist at CMC Markets, said: “Germany is in an absolute hole with no prospect of getting out of it, and yet the ECB seem more worried about inflation than they are about a depression.” The ECB expects household and government spending to drive recovery but figures from the economy appear to be painting a bleaker picture, with manufacturing remaining in recession and services cooling. Lagarde said cuts to government energy subsidies could weaken the eurozone further, though disruption to shipping in the Red Sea could send inflation higher, complicating the situation. Higher import and export costs, pushing up shop prices, could prevent the ECB from reacting to weakening growth by lowering borrowing costs. Next week, the US Federal Reserve is widely expected to hold interest rates. However, comments from Jerome Powell, chair of the central bank, will be intensely scrutinised to assess when the bank might begin reducing the burden on borrowers. Brian Jacobsen, chief economist at Annex Wealth Management, told Reuters: “It’s only fitting that a year that defied expectations would show growth that exceeded expectations. You have to squint to see weakness in the numbers. What’s not to like? “The problem for the market is that the Fed doesn’t have to be in a hurry to cut. Rather than cutting sooner and faster, the Fed can cut later and slower.” The US economy expanded by 3.3% in the last quarter of 2023, according to the annualised estimate for GDP, down from 4.9% in the previous quarter, but higher than expected by analysts.