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UK sees economy growing stronger

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LONDON”•The Bank of England on Thursday hiked its economic growth forecast for next year, as it froze its key interest rate at a record-low 0.25 percent and left stimulus unchanged.

The BoE, revealing its quarterly outlook alongside the rate decision, raised its prediction for this year’s growth and lifted its 2017 forecast, but downgraded 2018 GDP guidance.

Governor Mark Carney meanwhile warned that Thursday’s High Court decision to order a parliamentary vote on Brexit was part of the “uncertainty” arising from Britain’s shock EU exit referendum result in June.

“It’s an example of the uncertainty that will characterize this (Brexit) process,” governor Mark Carney told a press conference.

Governor of the Bank of England, Mark Carney, takes a drink during the quarterly Inflation Report press conference at The Bank of England in London on November 3, 2016. The Bank of England on Thursday hiked its economic growth forecast for next year, as it froze its key interest rate at a record-low 0.25 percent and left stimulus unchanged. AFP

“That uncertainty does bear down on business investment,” he warned.

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The economy was predicted to grow by 2.2 percent this year, by 1.4 percent in 2017 and by 1.5 percent in 2018. 

That compared with previous GDP expansion forecasts of 2.0 percent, 0.8 percent and 1.7 percent respectively.

“In the three months since (August), indicators of activity and business sentiment have recovered from their lows immediately following the referendum and the preliminary estimate of GDP growth in the third quarter was above expectations,” the central bank noted in a statement.

“These data suggest that the near-term outlook for activity is stronger than expected three months ago.”

It added that household spending had grown faster than expected in August, while the housing market had been more resilient.

The announcement came two hours after a ruling that parliament, not the government, must approve the start of Britain’s withdrawal from the European Union, in a landmark decision that could delay Brexit.

Three senior judges ruled that Prime Minister Theresa May did not have the right to use her executive power to trigger Article 50 of the EU’s Lisbon treaty, which begins a two-year countdown to leaving the bloc.

The pound advanced further against rival currencies on the BoE decision, having earlier jumped through $1.24 in the wake of the High Court ruling.

Sterling has tumbled to multi-year low points against its main rivals since Britain voted June 23 for Brexit.

The court ruling has “made triggering Brexit a lot trickier and has given sterling a massive shot in the arm”, said Neil Wilson, markets analyst at ETX Capital.

“The news sent the pound roaring through $1.24 before gains were pared as markets digest the news”•the fact is no one really knows what the implications of this decision are yet.”

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