Bank of England hikes UK growth forecast; holds rate

London: The Bank of England on Thursday ramped up its UK economic growth forecasts for the next three years, despite Brexit storm clouds on the horizon.

Alongside news that the BoE had kept its key interest rate at a record-low, the British central bank lifted its 2017 economic growth prediction to 2.0 percent from a 1.4-percent forecast just three months ago.

Gross domestic product (GDP) was set also to expand by 1.6 percent in 2018 and 1.7 percent in 2019. That was up from growth estimates of 1.5 percent and 1.6 percent respectively.

Also Thursday, the BoE kept the bank's rate at 0.25 percent and left its quantitative easing (QE) stimulus policy unchanged.

The outlook was brighter because of the British government's planned increase in public spending as announced in November by finance minister Phillip Hammond, the BoE said.

A solid global economy, recent strong gains for world stock markets and cheap borrowing would also boost growth, it added.

The bank's Monetary Policy Committee said it saw no evidence of a consumer spending slowdown since Britain's shock referendum vote last year in favour of exiting the European Union.

However, a recent sharp Brexit-fuelled tumble in sterling would hit spending at some point, it warned.

"Domestic demand has been stronger than expected over the past few months," the BoE noted.

"Nevertheless, continued moderation in pay growth and higher import prices following sterling's depreciation are likely to mean materially weaker household real income growth over the coming few years. As a consequence, real consumer spending is likely to slow," it added.

The British government is set to trigger Brexit by the end of March, which will spark a two-year process for the nation to leave the European Union.

Prime Minister Theresa May's government will Thursday publish its Brexit strategy after winning a first parliamentary vote on a bill that would empower her to start pulling Britain out of the bloc.