The Bank of England has upgraded its growth forecasts by the biggest amount on record as it scrapped its prediction of recession this year.

Policymakers admitted growth will be “materially stronger” than it previously thought, with the economy now expected to expand over the next two years rather than shrink.

The economy is now expected to return to its pre-pandemic size by the end of this year as Threadneedle Street rowed back on a prediction just three months ago that the UK economy will shrink for more than a year.

The rosier forecast came as policymakers raised interest rates for the twelfth consecutive time from 4.25pc to 4.5pc, taking borrowing costs to their highest level since 2008.