"If indeed economic growth is sustained at the 0.4-0.5% level, we prescribe a 25 basis point increase in Bank Rate in the first quarter of 2018"
The Institute says that if economic growth is sustained at this level, it would support a 25 basis point increase in Bank Rate in Q1 2018.
However it warned that "although activity has nudged higher, the economy continues to grow below its long run trend of some 0.6%".
Amit Kara, Head of UK Macroeconomic Forecasting at NIESR, said: “We estimate that economic growth accelerated to 0.4% in the three months to August. Our estimate is in line with our latest forecast for third quarter GDP which also stands at 0.4%. Service sector output as well as industrial production appears to have contributed to the uptick in GDP growth.
"Looking ahead into the second half of this year and beyond, we see the economy rebalance towards international trade in response to strengthening global growth and a weaker currency and away from domestic demand. Household spending is likely to be weighed down by weak wage growth and investment spending held back by Brexit-related uncertainty.
"If indeed economic growth is sustained at the 0.4-0.5% level, we prescribe a 25 basis point increase in Bank Rate in the first quarter of 2018 to reverse some of the emergency stimulus that the Bank of England injected into the economy last August in response to the EU referendum result.”
NIESR’s latest quarterly forecast (published 2nd August 2017) projected GDP growth of 1.7% per annum in 2017 and 1.9% in 2018.
