NIESR see Q1 2018 hike in Bank Rate if upturn sustained
(ShareCast News) - Bank should raise interest rates at the start of 2018 if the current upturn in the economy holds, one of the country's top think-tanks believes.
According to the National Institute of Economic and Social Research, Britain's the rate of growth in gross domestic product accelerated to a 0.4% clip over the three months to August, on the back of improved service and industrial sector output.
That was still below the economy's long-run trend of 0.6% but nevertheless, if sustained it would merit withdrawing some of the emergency stimulus applied by the Monetary Policy Committee in the wake of the EU referendum last August.
Looking ahead, NIESR's forecast was for activity to "rebalance" towards foreign trade - thanks to the stronger global backdrop and weaker Sterling - and away from domestic demand.
Weighing on the latter, weak wage growth was expected to detract from strength in household spending while Brexit-related uncertainty would hold back investment.
NIESR's latest projections pegged third quarter UK GDP growth at 0.4% quarter-on-quarter.