UK GDP second quarter growth keep BoE on track for rate hike

The UK economy continued to gently accelerate in the second quarter, eating further into existing spare capacity and thus keeping expectations for interest hikes on track, a leading think-tank said.

Britain’s gross domestic product expanded at a 0.7% quarter-on-quarter clip over the three months to June, according to the latest estimate from the National Institute for Economic and Social Research.

“This robust rate of growth exceeds that of the economy’s potential over the same period, and so suggests spare capacity continues to be absorbed. Consistent with this, we expect the Bank of England to begin increasing Bank Rate in early 2016, most likely coinciding with the February Inflation Report,” the think-tank said in a statement.

That implies GDP expanded at a 2.7% year-on-year pace over the last 12 months.

“Of course, risks to this outlook persist, not least the on-going Euro Area saga,” the NIESR added.