ITEM club lifts economic predictions

Economic think tank, the
Ernst &
Young’s ITEM Club
, has revised its autumn growth figures for the UK economy
upwards, predicting GDP growth of 2.9% for 2007.

But it predicted that a interest rate rise might be required the next time
Policy Committee

Peter Spencer, chief economic advisor to club said: ‘The UK economy is
expanding quicker than many of us anticipated but it can go faster,” he said.

However, interest rates need to be raised again in November to
stop credit expansion and asset price inflation spilling over into excessive
demand and inflation. If house prices continue to accelerate, interest rates
will have to rise further in 2007,’ he added.

The ITEM club had previously forecast growth of 2.6% but suggested there was
plenty of capacity for the economy to grow.

The club said the UK has been bolstered in recent months by a significant
rise in the number of older and retirement age workers as well as migrant
workers which has boosted the labour force, a buoyant FTSE, healthy retail sales
figures and rising house prices.

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