- Bank of England raises 2014 growth forecast to 3.5%, up from 3.4% in May
- Inflation will remain slightly below its 2.0% target over the next two years
- Amount of slack in the economy is now estimated at 1% of GDP, below previous estimate of 1.25%
Commenting on the Bank of England’s Quarterly Inflation Report, David Kern, Chief Economist at the BCC, said:
“The Bank of England’s Inflation Report conveys mixed messages on the outlook for interest rates. The higher growth forecast for 2014 and the lower estimate for the amount of slack in the economy may be seen as a signal to bring forward interest rate rises. However, Governor Carney’s comments will reassure businesses that the MPC will not rush any increases in rates. He also acknowledged that the rising supply of labour in the economy may provide new sources of economic capacity.
“It is pleasing that the MPC has reaffirmed its commitment that when rates start to rise, they will do so slowly and not reach the level seen before the recession. We must nurture the business confidence we are seeing at present by giving businesses the security of working in a low interest rate environment for the foreseeable future.”