BoE ups UK growth forecasts again

In its February Inflation Report the BoE predicted a 2 per cent GDP rise in 2017, sharply higher than the 1.4 per cent predicted in November's report. The BoE also forecast that GDP would rise 1.6 per cent in 2018 and 1.7 per cent in 2019 - both 0.1 percentage points higher than the last estimate.

The report came amid the Monetary Policy Committee's (MPC) decision to keep interest rates and quantitative easing programme unchanged, the fourth month in a row it has done so since the rate cut and package of easing measures announced last August.

While the BoE has reversed course slightly on its assessment of the impact of the UK's Brexit vote and subsequent sterling slump, its 2017 and 2018 forecasts remain below the 2.3 per cent growth predicted for either year as of last May.

The central bank also published its inflation expectations as part of the report. It now believes CPI price growth will reach its 2 per cent target this year - an increase from the 1.8 per cent predicted in November.

The BoE acknowledged sterling-induced inflation could be embedding in the economy quicker than previous thought. As a result, it lowered its inflation forecast for 2018 to 2.7 per cent, and predicted a fall in inflation from 2019 to 2020.

The report said: "Higher import prices are judged likely to have their greatest effect on CPI inflation in around a year’s time."

The BoE suggested revisions to its GDP forecasts were down to domestic demand being stronger than anticipated, as was demonstrated last week by figures which showed GDP rose 0.6 per cent in the final quarter of 2016 - well above expectations.

However, the central bank dampened expectations of a continued rise in consumer confidence.

It said: "A number of factors are projected to weigh on real income growth over the forecast period. Household real income is projected to be broadly flat over 2017, and four-quarter consumer spending growth is judged likely to slow in response."

Despite the revised forecasts, monetary policy is expected to remain on hold for the foreseeable future. Governor Mark Carney said he could envisage "scenarios in either direction", referring to the prospect of either a rate cut or a rate hike in future.