The Bank of England has sharply upgraded its forecast for UK growth again, predicting that economic output will expand as fast this year as it did last year and that unemployment will be just as low as it predicted before the Leave vote.

It predicted Britain's consumers will run down their savings and borrow at a record rate, fuelling a solid increase in gross domestic product of 2% this year - the same rate the Office for National Statistics reported for 2016 only last week.

The upgrade is only the latest in a series from the Bank.

Before the referendum last year it expected the economy to grow by 2.3% this year.

After the vote, it cut the forecast to 0.8%.


In last November's Inflation Report it raised the projection to 1.4%.

Image: Consumers are forecast to continue spending to aid growth

Together with today's further upgrade, that represents one of the biggest six-month changes in the Bank's forecast on record.

:: Better a bit more debt than a bit less growth

In spite of that stronger growth, and continued weakness of the pound, the Bank said it expects inflation to grow less fast than predicted in its last forecast, peaking at 2.7% next year rather than 2.8%.

The Monetary Policy Committee voted to leave interest rates unchanged at their record low of 0.25%, though the minutes said that there were limits about how much inflation could be tolerated, and that some of the MPC's nine members felt "they had moved a little closer to those limits".

All the same, while some investors had expected the Bank to signal it would soon lift borrowing costs, the Inflation Report itself suggests that if any rate hikes come they may not arrive until the end of next year.

Image: The Bank sees employment levels holding steady

The report predicted that unemployment would remain low in the coming years, close to 5%, rather than rising to 5.5% as previously predicted.

However, it also pointed out that much of the coming year's economic growth would be due to consumer borrowing, with the household saving rate dropping to its lowest level since comparable records began in 1963.

The pound, which is 18% lower versus the dollar since the EU vote, plunged by a cent from a seven-week high to $1.25 following the publication of the report as investors saw the prospect of an interest rate rise even further down the road.