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The Bank of England was right to unexpectedly raise interest rates by a quarter point yesterday, an analysis group has claimed.

Publishing its monthly estimate of Britain's GDP today, the National Institute of Economic and Social Research (NIESR) said that growth had reached 0.7 per cent in the final quarter of 2006. This represents an improvement on the 0.6 per cent growth registered in the three months to November last year.

A strong performance from Britain's economy means the Bank's monetary policy committee (MPC) did the right thing in confounding commentators' expectations by raising rates to 5.25 per cent in January rather than February, as had been widely expected.

"Growth is robust and inflation is above target,'' NIESR analyst James Mitchell told the Bloomberg news agency.

"We very much welcome the rise the MPC made. If the economy continues to grow at this rate another increase may be needed.''

Having raised interest rates from 4.5 per cent in August and November last year, many believed one further hike would be necessary early in 2007 to tackle rising upward inflationary pressures.

Consumer price index (CPI) inflation currently stands at 2.7 per cent, 0.7 per cent above the target set for the Bank by chancellor Gordon Brown.