Reacting to the Monetary Policy Committee’s (MPC) revision of growth forecasts from 1.4% to 2%, fund managers such as Cavendish’s Paul Mumford said the figures are clear evidence the economy is holding up well following the referendum vote last June.
The new forecast is significantly higher than the 1.4% growth the bank first predicted in November 2016, and it has predicted further growth of 1.6% in 2018 and 1.7% in 2019.
Expectations for inflation have also been revised up, with weaker sterling and a boost in consumer prices expected to lead to “substantial increases” in inflation which could see it overshoot the bank’s 2% target.
Mumford said it “wouldn’t be a surprise” if inflation rose above the target level.
He said: “Today’s increased growth estimate for 2017 further demonstrates how the economy is holding up well following the Brexit vote. By the same token it further undermines the forecasts of doom we were hearing last year – one only hopes these estimates turn out to be a bit more accurate.
“It wouldn’t be a surprise if inflation ends up ticking higher than predicted. There are a number of incoming factors that look likely to put upwards pressure on inflation – the living wage, higher import costs as a result of Sterling’s fall, and a potential rise in the oil price to name a few. It is difficult to see what the counter-force will be to keep inflation at around the current level.”
