The Bank of England has once again significantly increased its growth forecast for the year. It now expects the UK economy to grow by 2% in 2017 – a major rise from its November forecast of 1.4%.
That forecast was itself an upgrade from the 0.8% forecast made in August.
The Bank was criticised last year for its overly pessimistic predictions following the June Brexit vote. Announcing the latest forecast, Governor Mark Carney admitted that the Bank had misjudged the strength of consumer confidence following the referendum.
He commented: ‘The thing that we missed is the strength of consumer spending and consumer confidence associated with that.
‘After an initial wobble in terms of consumer surveys… it bounced back pretty quickly.’
However, he warned that the implementation of Brexit could still cause difficulties, saying: ‘The Brexit journey is really just beginning. While the direction of travel is clear, there will be twists and turns along the way. Consumers have not been affected by the uncertainty around Brexit.
‘Uncertainty over future arrangements is weighing on business investment, which has been flat since the end of 2015.’
In the longer term, the Bank still expects the economy to slow down, with growth in 2018 predicted to fall to 1.6% in 2018.
As expected the Bank’s Monetary Policy Committee (MPC) kept interest rates on hold at 0.25%.