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UK economy ‘looking good and is set to grow strongly’

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The UK economy will exceed expectations in 2007 despite another probable rise in interest rates to 5.5%, according to the Confederation of British Industry (CBI).

It is predicting growth of 2.9% this year, topping its original forecast of 2.7%, with the economy staying buoyant on robust consumer spending and positive trends in national saving and investment.

The CBI also expects the Bank of England to maintain “a tight grip” on fiscal policy, even though inflation is expected to moderate and conditions remain generally benign. Consumer inflation, for example, is expected to slow to 1.6% from its current level of 2.7%.

“The economy will enjoy better than expected growth this year as consumers continue to spend and businesses make UK investments into their companies,” said Ian McCafferty, chief economic adviser at the CBI.

“Our economic forecast shows the economy is in good shape at the moment, with above-average growth this year and a good outlook for the year after.”

City analyst Colin Perry said: “I’m expecting lower energy prices this year as the wholesale cost of gas and electricity reduces, but there is still underlying inflationary pressure to my mind because consumers are so well resourced and likely to keep spending.

“Still, overall this is a good picture for UK investment and I’m confident that the numbers will be good as we go through the year.”






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