The Bank of England expects the UK economy to grow at a slightly faster pace in 2018 than it previously expected, and warned interest rates might increase sooner and faster than expected.
In its quarterly inflation report, released at lunchtime today (8 February), the central bank said it expects the UK economy to grow by 1.8 per cent this year.
The Bank's previous forecast, made in November 2017, was for growth of 1.6 per cent.
The Bank cited stronger global economic conditions as the reason for the upgrade.
That echoes the thoughts of Jim O'Neill, a remain supporter and former government minister, who has said he expects the economic impact of the UK's exit from the European Union to be much less than he previously feared because the lost growth from the domestic part of the UK economy will be made up for by the extra growth that comes from the rest of the world buying our goods and services.
Ben Brettell, senior economist at Hargreaves Lansdown, said the Bank of England's statement on interest rates and inflation, mirrors the line used in September 2017, two months before rates were raised in November.
Ian Kernohan, economist at Royal London Asset Management, said: "The latest Inflation Report significantly raises the risk of a rate hike in May.
"Assuming there is no major economic shock, the Monetary Policy Committee has judged that monetary policy needs to be tightened somewhat earlier, and somewhat more, than anticipated in November."
The Bank of England said it has detected signs of wage growth entering the economy in the coming year.
Sterling is up a little more than 1 per cent against the dollar as a result of the Bank's announcement.
The central bank left interest rates unchanged this morning.
david.thorpe@ft.com
