With sustained rises in real wages now in prospect, real consumer spending growth should accelerate again. Of course, Brexit-related uncertainties and their economic effects could intensify over the coming quarters, particularly if Brexit turmoil results in a general election. In the absence of those developments, though, we remain cautiously optimistic that the UK economy will expand by 1.6% this year and by 2% or so in 2019 and 2020. Such a backdrop should allow the Monetary Policy Committee to press ahead with gradual monetary policy normalisation. Indeed, we continue to think that interest rates will rise a bit more quickly than financial markets and most forecasters anticipate.
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