Economy

Bank of England hikes growth forecasts as economy defies Brexit fears

Improved outlook comes in spite of concerns about consumer spending slowdown

Mark Carney, governor of the Bank of England, at a quarterly inflation report press conference in London on Thursday. Photograph: Kirsty Wigglesworth/PA Wire

Thu Feb 2 2017 - 16:27

The Bank of England has hiked its growth forecasts for the next three years as UK government spending looks set to help the country’s economy to continue defying Brexit slowdown fears.

Minutes of the latest Monetary Policy Committee decision showed policymakers voted unanimously to keep UK rates on hold at 0.25 per cent as the bank made sweeping 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 would see household income stall over the next two years.

Impressive

In its quarterly inflation report, the bank upped its forecast for gross domestic product (GDP) to rise by 2 per cent this year, 1.6 per cent in 2018 and 1.7 per cent in 2019.

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This is up from its November predictions for 1.4 per cent growth in 2017, 1.5 per cent in 2018 and 1.6 per cent in 2019.

It comes after impressive growth of 0.6 per cent in the final quarter of 2016 as GDP has remained 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 UK chancellor’s autumn statement last November.

It added that a solid global economy, surging stock markets and cheap borrowing were also helping support growth.

-(PA)

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