Bank of England raises 2017 growth forecasts to 1.4%

However 2018 growth remains more subdued, down to 1.5% from the 1.8% predicted in the August report.

In August, the Bank cut growth its 2017 forecasts from 2.3% to just 0.8% following the vote to leave the European Union as "the outlook for growth in the short to medium term weakened markedly".

GDP grew by 0.5% in 2016 Q3 according to preliminary estimates, higher than expected and down only slightly from the upwardly revised Q2 outturn. Survey indicators suggest a modest further slowdown in Q4, which is a much stronger profile for the second half of the year than assumed in the August projections.

As a result, the Bank has revised up its expectations for Bank Rate, which is now predicted to rise to 0.4% by late 2019.

Yesterday, NIESR reported that it expects CPI inflation to "accelerate rapidly" to reach 4% in late 2017 and remain above the Bank of England’s 2% target until 2020.

The revised figure is higher than the 3% forecast in August due to "substantial impending inflationary pressure... driven by the dramatic fall in sterling, which has been one of the most striking features of the post-referendum data".

The think tank also revised up its GDP forecasts to 2% in 2016, slowing to 1.4% in 2017 when the triggering of Article 50 poses "downside risks".

NIESR also expects the Bank of England's MPC to hold Bank Rate at 0.25% until the second half of 2019.