The level of unemployment in the UK is set to fall faster than the Bank of England (BoE) and other economists had predicted, according to a statement from BoE policymaker Michael Saunders reported by Reuters.
Saunders said that although the short-term outlook for growth was mixed, the economy could grow faster than the sustainable long-term trend, which would push up inflation.
The BoE figure said: “Balancing out the positives and negatives, the near-term outlook for the economy is not great, but nor is it terrible.”
Saunders said that any interest rate rises are likely to be limited and gradual. In November 2017, the BoE said financial markets should expect two more quarter-point interest rate rises by 2020, which would raise interest rates to 1%, up from the current level of 0.5%.
Unemployment rates are set to fall to 4% in 2018, down from 4.3% in the three months to October. This is lower than a BoE forecast in November, which predicted the rate would fall to 4.2% by the end of 2017 and remain at that level throughout 2018.
For the first time since 2009, wage growth in the UK is set to reach or exceed 3% this year. Fresh growth and inflation forecasts from the BoE are expected in February 2018.