The Bank of England has upgraded its growth forecasts for next year, saying the economy “has started to head back towards normal”.
Its latest inflation report predicts growth of 2.9% next year, up from its 2.7% forecast three months ago.
However, it has left its forecast for this year unchanged at 3.4%.
Governor Mark Carney said the economy had “edged closer” to the point when interest rates would need to rise, but indicated this remained some way off.
He reiterated that any increases would be “gradual” and that the rate “may stay at historically low levels for some time”.