UK Economy Set For Strong 2015, But Premature Rate Hike 'Huge Risk:' BCC

(Reuters) - Britain's economy still looks on course to expand at a strong pace in 2015, but raising interest rates now would pose a "huge risk" to its recovery, the British Chambers of Commerce said on Wednesday.

The BCC trimmed its forecasts for economic growth in 2014 and the coming years, projecting a 3.0 percent expansion this year, 2.6 percent next year and 2.4 percent in 2016.

In August, it had predicted growth of 3.2 percent, 2.8 percent and 2.5 percent, respectively.

While 2014 should mark Britain's best economic growth since 2007, the BCC said next year presented big political and economic risks -- not least a stuttering euro zone economy and a general election in May.

"Downgrades to our growth forecast are a warning sign that we still face a number of hurdles to securing a balanced and sustainable recovery," said BCC Director General John Longworth.

"A sustainable, well-balanced economy can only be achieved if there is commitment from all political parties to long-term strategic planning, rather than the political short-termism that has plagued British growth prospects for too long."

Longworth also warned against prematurely raising Bank of England interest rates from their record low 0.5 percent, their level for nearly six years.

"Our dependence on consumer spending and mortgages means that the UK economy is particularly sensitive to interest rates," he said. "Any short-term rate rises could present a huge risk to our economy."

The BCC forecast a first interest hike to 0.75 percent in the third quarter of next year, with rates reaching 1.75 percent by the end of 2016.

So far, only two out of nine BoE rate setters have voted to hike interest rates in recent months.

The BCC's 2.6 percent economic growth forecast for next year was a little more optimistic than the 2.4 percent expansion predicted by Britain's independent Office for Budget Responsibility last week.

And on Tuesday, the National Institute for Economic and Social Research showed growth would come in around 2.5 percent in 2015.