UK economy power ahead, raising questions on interest rate

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UK economy power ahead, raising questions on interest rate

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Britain’s economy last year recorded its fastest annual growth since 2007 – before the financial crisis.

GDP increased by 1.9 percent – way better than the 0.3 percent of the previous year.

There was however a slight slowdown in growth in the final three months of the year – at 0.7 percent.

And total output is below where it was just before the financial crisis – unlike almost all other big advanced economies.

The pace of growth is fueling speculation about when the UK central bank will put up interest rates, currently at a record low.

“We forecast the Bank will start hiking in Q2 2015, given the strong turnaround in the economy and labour market,” said Blerina Uruci, an economist at Barclays. “A hike as soon as 2014 would be premature in the current environment of subdued inflation pressures and would risk choking off the recovery.”

Bank Governor Mark Carney has said there is no need for rates to rise anytime soon, and the Bank itself had forecast fourth-quarter growth at just under 1.0 percent.