Market News

LONDON, March 2 (Reuters) - Britain's economy is showing slightly more momentum than expected and pay growth is proving a bit faster than the central bank forecast last month, Bank of England Chief Economist Huw Pill said on Thursday.

Last month the BoE forecast that Britain was likely to see a shallow but fairly long recession, lasting more than a year, as households and businesses reckoned with the after-effects of last year's surge in energy prices.

Pill, in notes prepared for an event hosted by the Institute of Directors, said recent data had been more positive.

"Survey indicators that have become available since the publication of the forecast have surprised to the upside, suggesting that the current momentum in economic activity may be slightly stronger than anticipated," Pill said.

Preliminary February purchasing managers' index (PMI) data released last week unexpectedly rose into growth territory for the first time since July.

BoE Governor Andrew Bailey said in a speech on Wednesday that it was possible the bank may not need to raise rates further.

Members of the BoE's Monetary Policy Committee (MPC) disagree on whether last year's surge in inflation to a 41-year high has created a big risk of a lasting increase in underlying inflation pressures.

Pill highlighted how the official measure of private-sector pay growth, excluding bonuses, had risen faster in the most recent data than the BoE had forecast last month.

"That said, some high-frequency indicators of wages have fallen quite sharply recently," he said.

"The MPC will continue to monitor indications of persistence in domestic inflationary pressures closely, with a focus on developments in the labour market, in wage dynamics, in services price inflation and in measures of underlying inflation and inflation expectations," he added.

Reporting by David Milliken; Editing by Elaine Hardcastle and Hugh Lawson