CBI points to growth

According to the CBI’s latest economic forecast, a -up in the UK economy over the last quarter will drive GDP growth of 2.4 per cent this year and is expected to increase to 2.5 per cent in 2007.

However, headline inflation, driven by the high cost of energy, will exceed its two per cent target throughout the period. It will peak at 2.5 per cent in the first quarter of next year before falling back over the remainder of 2007.

But, the CBI says, the Bank of England can still deliver its inflation-mandate without raising interest rates as energy prices are expected to stabilise and domestic pressures to remain under control.

The upward revision in annual GDP growth for 2006 (up 0.1% on March's forecast) is based on a stronger international economic performance than previously assumed, a corresponding demand for UK goods and services exports, and the greater government consumption revealed by the Treasury in the spring.