Bank upgrades growth forecast on back of strong GDP
The Bank of England has hiked its growth forecasts for the next three years as Government spending looks set to help the economy continue defying Brexit slowdown fears.
Minutes of the latest Monetary Policy Committee (MPC) decision showed policymakers voted unanimously to keep rates on hold at 0.25% as the Bank, headed by Mark Carney made upgrades to its growth outlook.
But rate-setters warned a consumer spending slowdown was still on the cards as soaring inflation caused by the weak pound and poor wage growth will see household income stall over the next two years.
In its quarterly inflation report, the Bank upped its forecast for gross domestic product (GDP) to rise by 2% this year, 1.6% in 2018 and 1.7% in 2019.
This is up from its November predictions for 1.4% growth in 2017, 1.5% in 2018 and 1.6% in 2019.
It comes after impressive growth of 0.6% in the final quarter of 2016, with GDP has remaining surprisingly resilient since the Brexit vote last June.
The Bank, which has now raised its growth outlook twice in the last three months, said the "most significant" reason for the upgrades was the Government spending boost revealed in the Chancellor's Autumn Statement last November.
It added that a solid global economy, surging stock markets and cheap borrowing were also helping support growth. Minutes of the MPC meeting showed some policymakers believed it was becoming harder to justify keeping rates at record lows, with growth showing surprising resilience and inflation rising.
The Bank said: "The more time that passed without a noticeable reduction in economic growth, the more difficult it would become to tolerate the extent of the inflation overshoot."