Think tank raises British economic growth forecasts

Britain's National Institute of Economic and Social Research (NIESR) Tuesday announced that it has revised up British economic growth forecasts for 2015 and 2016, from 2.5 percent an 1.9 percent, to 2.9 percent and 2.3 percent respectively.

The British economic think tank said in its quarterly report that the revision of the year 2015's GDP growth is mainly due to the sharp fall in oil price, which could not only boost the consumer spending, but is able to improve UK's trade balance.

But it expects growth to moderate in 2016 and beyond, as the positive impact of the oil price shock dissipates and domestic demand growth softens.

NIESR also expects that Britain's unemployment rate will drop to 5.2 percent by the end of this year, and the CPI inflation will average at around 0.5 percent this year, well below the British central bank's target of two percent.

Data from the Office for National Statistics (ONS) showed that the CPI inflation rate in December 2014 was merely 0.5 percent, far below the previous month's 1.0 percent. And the latest unemployment rate is 5.8 percent.

The think tank said it does not expect interest rate to rise until the beginning of 2016, due to the deflation risk in the country.

The Bank of England's benchmark interest rate currently remains at 0.5 percent. Endit