Credit Suisse raises UK GDP forecast after energy package

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FILE PHOTO: The City of London financial district seen from across the River Thames, London, Britain

LONDON (Reuters) - Credit Suisse raised its 2023 UK GDP forecast on Friday, predicting that the UK government's plan to freeze household energy bills for two years will likely lead to a shallower recession and lower near-term inflation.

Economists at the Swiss bank revised up their UK GDP forecast for 2023 to -0.2% from a previous -0.6%.

Credit Suisse also expects higher interest rates as a result of the energy package, which Prime Minister Liz Truss unveiled on Thursday, and a much bigger fiscal deficit. The bank now expects the Bank of England to hike rates from a current 1.75% to 4.0% by the first quarter of 2023, versus its previous forecast of 3.5%.

(Reporting by Lucy Raitano; Editing by Tommy Reggiori Wilkes)