Interest rates to stay low until 2014, CEBR says
UK interest rates are not likely to be raised until 2011 and will stay below 2% until 2014, the Centre for Economics and Business Research (CEBR) said.
The think-tank also predicted that the pound would weaken as rates remain low, possibly falling to parity with the euro and to $1.40, and said that the Bank of England (BoE) was likely to expand its quantitative easing programme, which basically amounts to printing money, by another £75bn to £250bn.
The BoE kept rates at 0.5% and left the quantitative easing programme at £175bn last week.
Earlier in the week Australia became the first major industrialised country to raise interest rates since the onset of the global economic crisis.
The CEBR says the next government, which will be formed after the next election which must be held on or before June 3, will have to find £100bn in tax rises and spending cuts to balance the country’s finances.
‘We are likely to see an exciting policy mix, with the fiscal policy lever pulled right back while the monetary lever is fast forward,’ CEBR chief executive Douglas McWilliams said.
The CEBR expects economic growth to average 1.4% between 2009 and 2014, with a dip in 2011 and 2012 as budgets are cut.