“The small upward revision to the first quarter GDP figures, although widely expected, is a welcome development that will give the new government more room for manoeuvre to present a credible deficit-cutting plan in next month’s Budget.
“With the economy having recorded positive growth for the second quarter in a row, the threat of an immediate relapse is now less severe. However, the recovery is still fragile and the international situation has become more uncertain, so it would be unwise to completely ignore the risk of a double-dip recession later in the year.
“The government must persevere with firm measures, focusing on spending cuts rather than tax rises. Given the pressures still facing businesses, it must be extremely cautious to avoid measures that hamper business investment and growth.
“With the government focusing on dealing with the deficit, it is important for the MPC to keep interest rates as low as possible for an extended period. An increase in interest rates in the near future could cause huge damage to a recovery that is still frail.”