September 8, 2017 / 12:26 PM / 10 months ago

UK economy picking up, rate hike possible in early 2018 - NIESR

LONDON (Reuters) - Britain’s Brexit-bound economy has picked up a bit of momentum and the Bank of England might raise interest rates in early 2018, the National Institute of Economic and Social Research (NIESR) estimated on Thursday.

Construction work is carried out on the Elizabeth Tower, commonly known as Big Ben, in London, Britain July 4, 2017. REUTERS/Hannah McKay

Britain’s economy likely expanded by 0.4 percent in the three months to August, speeding up from 0.2 percent in the three months to July but below its long run trend of quarterly growth of about 0.6 percent.

“Looking ahead into the second half of this year and beyond, we see the economy rebalance towards international trade in response to strengthening global growth and a weaker currency and away from domestic demand,” Amit Kara, head of UK macroeconomic forecasting at NIESR, said.

“If indeed economic growth is sustained at the 0.4-0.5 percent level, we prescribe a 25 basis-point increase in Bank Rate in the first quarter of 2018 to reverse some of the emergency stimulus that the Bank of England injected into the economy last August in response to the EU referendum result.”

Writing by William Schomberg, editing by Andy Bruce

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