Bank of England raises growth forecasts in face of Brexit
In spite of that stronger growth, and in spite of the continued weakness of the pound, the Bank said that it expects inflation to grow less fast than predicted in its last forecast, peaking at 2.7% next year rather than 2.8%.
According to the Inflation Report, the fall in sterling will raise CPI inflation, which is likely to return to around the 2 percent target by February and then rise above it over the following months.
The Bank of England has hiked its growth forecasts for the next three years as United Kingdom government spending looks set to help the country's economy continue defying Brexit slowdown fears.
He is forecasting a slowdown in growth to 0.4% in the first quarter, easing slowly further as the year progresses.
"If it does happen, I would expect interest rates to remain at their previous low of 0.5% for some significant time afterwards".
Bank of England governor Mark Carney has said the Bank is prepared to tolerate inflation running above its target, but in the minutes from their latest meeting, members of the Monetary Policy Committee said they had moved "a little closer" to the limit of that toleration.
Real income, which accounts for tax and inflation, is projected to rise by 0.75% this year, though the quarterly growth rate is expected to flatline.
"The upgraded outlook over the forecast period reflects the fiscal stimulus announced in the Chancellor's Autumn Statement, firmer momentum in global activity, higher global equity prices and more supportive credit conditions, particularly for households", the BOE said.
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The Bank of England on Thursday ramped up its United Kingdom economic growth forecasts for the next three years, despite Brexit storm clouds on the horizon.
But minutes from the meeting revealed that some members of the nine-strong committee were growing more anxious about inflation, which has been rising as the weak pound pushes up the costs of imports to the UK.
Economic theory says that wages should be driven up when unemployment is low, but the Bank now thinks there is more slack in the economy than it previously thought and estimates the economy can run with unemployment at 4.5%, without sparking wage inflation.
The National Institute of Economic and Social Research, earlier this week, forecast the United Kingdom economy to grow 1.7 percent this year and 1.9 percent next year.
The economy has grown by 0.6% in each of the last three quarters, confounding forecasts by experts - including those at the Bank - of a sharp slowdown after the vote to quit the EU.
In November, the BoE forecast figures of 1.8%, 2.8% and 2.6%, respectively.
The growth upgrades are due to a "relaxed United Kingdom fiscal stance" and "momentum in the global economy", said the BOE.
After annual growth of 2% in 2016, he sees the economy slowing to 1.4% in 2017.
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