The economic expansion is gathering pace, with output growing faster than its potential rate, driven by strong exports and a rebound in investment. Export growth is projected to remain robust, and household consumption will be boosted by tax cuts and rising house prices. Those factors should drive the long-awaited improvement in employment, which will also support domestic demand. Inflation is likely to pick up, as spare capacity will be absorbed by the end of this year. The central bank will therefore need to begin raising interest rates soon. In September, the government added a substantial fiscal stimulus to an already-buoyant economy. This will make the job of monetary policy more difficult and risks jeopardising the government’s medium-term fiscal target. ...