ECONOMISTS are predicting that the Bank of England will raise interest rates next month following unexpectedly strong sales and output figures.

Analysts said the bank's monetary policy committee was likely to raise base rates by at least 0.25 per cent after high street sales last month showed their highest growth since May 2002, up 0.9 per cent against the previous month's 0.1 per cent.

There was more good news on the economy from output figures, which showed estimated gross domestic product rising 0.9 per cent in the fourth quarter of last year against the previous three months.

The Government said the data showed that economic growth was strengthening and that the underlying state of the public finances was strong and sustainable.

The 0.9 per cent rise in December sales volumes was the highest monthly increase since June last year, figures from the Office for National Statistics (ONS) showed.

Total retail sales grew by 1.9 per cent in the three months between October and December against the previous three months, when the growth was 1.4 per cent.

The ONS said many retailers, particularly women's clothing outlets, moved their end-of-year sales earlier into December.