The Bank of England has raised its growth forecast again

The UK economy will grow by 2.9% next year, up from the 2.7% it forecast three months ago. Hurrah.

by Emma Haslett
Last Updated: 14 May 2014

The Bank of England published its monthly inflation report this morning (which, confusingly, isn't the same as its inflation figure. But, on the bright side, does include some rude-looking graphs).

The report said the Bank had upgraded its growth forecast for next year to 2.9%, from 2.7% three months ago - although its prediction for growth this year stayed at 3.4% (although even after the event, those figures can change. Remember when the ONS magicked us out of a double-dip recession?). Still: good news, particularly after today's good news about unemployment.

The question on everyone's lips was inflation: when is it going to rise? Carney had originally said it would be when unemployment dips below 7%, but then that happened in February, which he saw as too soon.

'Securing the recovery is like making it through the qualifying rounds of the World Cup - it's a real achievement, but not the end goal,' he said. The 'prize' is 'sustained and prolonged growth'. The economy has 'edged closer' to a point when rates will need to 'gradually rise', but they'll 'stay at historically low levels for some time', he added.

What's interesting is that, after this morning's labour market statistics showed a massive rise in the number of self employed people, the report showed there is still a lot of 'slack' in the economy - ie. there are people who are working part time or self employed who would rather be in a full-time job. Apparently the 'spare capacity' is equivalent to between 1% and 1.5% of GDP. Carney added that the Bank expects inflation to stay below its 2% target for a couple of years.

Sterling, which dipped slightly yesterday, rose to a 16 month high against the euro this morning. 'We hold a bullish view for the pound at present,' said Derek Halpenny, European head of global markets research at Bank of Tokyo Mitsubishi. So does Carney, by the sound of it...


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