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U.K. Economy Grew 0.6% in 3 Months Through April

May 12 (Bloomberg) -- The U.K. economy sustained growth of 0.6 percent in the three months through April, strengthening the case for higher interest rates, the National Institute for Economic and Social Research said.

The pace of expansion was the same as in the first three months of the year and the fourth quarter of 2005, the London- based institute, whose clients include the Bank of England and the U.K. Treasury, said today. The economy grew 0.7 percent in the three months through January, it estimated.

Industrial production growth outpaced that of services for the first time since 1999 in the first quarter as accelerating economic growth lifted exports. Investors are betting the Bank of England will raise its benchmark interest rate to 4.75 percent this year to cool inflation, which it forecasts will exceed its 2 percent target.

``Given growth at its trend rate and the implications of a buoyant outlook for cost pressures, our view remains that interest rates should be raised at the next opportunity,'' the institute said in a statement.

Sept'06 short sterling currently down again at 95.060. The markets have priced in a 0.25% rise as a certainty before September.

Looks like rate rise may come faster than we had expected.

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