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Britain's economy faces 'tougher years ahead'

The EY Item Club's latest quarterly forecast says that growth in Britain's economy will be tougher to achieve over the next three years as the benefit of lower fuel prices for consumers ebbs away. As such, it predicts sluggish spending will lead the Bank of England to hold off from raising interest rates until autumn next year. The report anticipates the rate of growth will slow to 2.5% this year from 2.9% in 2014, and it will reduce further next year, particularly due to the impact of cuts to tax credits. The forecast contrasts with Bank governor Mark Carney's recent assertion that the economy is strong enough for rate rises to be considered 'around the turn of the year'. The Item Club also anticipates increased business investment as higher wages will prompt companies to seek improved rates of productivity. It also expects inflation to start rising this winter but to remain below the Bank's 2% target until 2018.


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