LONDON, May 10 (Xinhua) -- The British economy is forecast to grow by 1.7 percent this year, and for GDP growth to increase in 2018 to 1.9 percent.
The forecast was made by the National Institute of Economic and Social Research (NIESR) on Wednesday in its quarterly economic forecast.
Simon Kirby, head of macroeconomic modeling at the NIESR, said that this year Britain had seen several events which could move markets, with none having an adverse effect on the economy.
Kirby said: "The big surprise has been calling the election by the prime minister on June 8 -- as yet this has not led to any major shifts in financial markets but we await the outcome of the elections. By and large, it is a relatively stable period for the UK."
The slowdown can be largely attributed to a softening in service sector output, said Kirby, consistent with a moderation in consumer spending, which was the driver of growth in 2016.
The NIESR forecast expected consumer spending to remain weak throughout this year and 2018 as rising inflation erodes the purchasing power of households.
Kirby said there had been an "erosion of purchasing power" caused by the pick-up of inflation as a consequence of the sharp depreciation of sterling in 2016. Inflation had been at 0.5 percent at the time of the 2016 June Brexit referendum.
"What we will see through the course of this year is the continued pass-through from that earlier depreciation of sterling," said Kirby.
The NIESR forecast that the BOE's rate-setting Monetary Policy Committee (MPC) would look through this spike in inflation and would maintain the bank rate at 0.25 percent (a record low) until mid-2019, after which was forecast to tighten gradually by around 50 basis points per annum.
