Bank Of England Raises Growth Forecast By 21%
The Bank of England governor has announced an increase in the forward growth forecast for the British economy to 3.4%, signalling good news for mortgage holders.
Mark Carney said there was still "scope" for the economy to keep the base rate at a record low of 0.5%.
He added that the bank's monetary policy committee (MPC) expects the growth estimate for the last three months of 2013 to rise from 0.7% to 0.9%.
Mr Carney said the first-quarter growth for this year would remain "robust" at around 0.8% and wanted to see "sustained" growth before raising the base rate.
That signals relief to millions of homeowners and those seeking mortgages, as interest rates should remain low for some time.
When interest rates do rise, taking into account growth and unemployment, the increase is expected to be small.
Also taken into account in the decision was ongoing subdued wages and prices, and disparity across the country.
Future rate increases would then be "gradual and small", in part to keep inflation at the current target of 2%.
Mr Carney said there was "extra capacity" in the economy which can be used before the MPC considered a rise.
The committee, he added, now believed the economy has been stronger than previously thought.
The MPC said in forward guidance notes: "The actual path of bank rate over the next few years, will, however, depend on economic developments.
"Even when the economy has returned to normal levels of capacity and inflation is close to the target, the appropriate level of bank rate is likely to be materially below the 5% level set on average by the committee prior to the financial crisis."
The MPC has also predicted that the jobless rate will hit the 7% benchmark shortly.
Latest quarterly data, for the three months to the end of November, recorded unemployment at 7.1%.
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