Low rate forecasted in UK until 2011
(13 October 2009 – UK) The Bank of England will keep its key lending rate at a record-low 0.50 percent until at least 2011 as Britain recovers from a deep recession, an independent economics consultancy has forecast.
A new report released by the Centre of Economics and Business Research (CEBR) shows that the base rate of 0.50 percent should remain at the current level until at least 2011 and will continue to remain below 2.0 percent until 2014.
The forecasts are based on the assumption that the incoming government will need to take fiscal action of around 100 billion pounds (A$174 billion dollars) as well as tax rises and spending cuts to correct the fiscal deficit.
If as the bookmakers expect, the new government is Conservative, the forecasts suggest tax rises of 20 billion pounds and spending cuts of 80 billion pounds.
CEBR’s forecasts assume that the incoming government will need to get the budget deficit down to 50 billion pounds by 2014/15. Without fiscal action the forecasts predicts a deficit of 143 billion pounds in that year.
Charles Davis, senior economist, CEBR, said that the risks to the scenario in the forecasts are from the world economy and from inflation.
The forecasts show low levels of labour cost inflation which should keep the consumer price index low enough to prevent the Monetary Policy Committee from having to raise rates until the economy is recovering, Mr Davis added.
The forecasts are based on the assumption that the incoming government will need to take fiscal action of around 100 billion pounds (A$174 billion dollars) as well as tax rises and spending cuts to correct the fiscal deficit.
If as the bookmakers expect, the new government is Conservative, the forecasts suggest tax rises of 20 billion pounds and spending cuts of 80 billion pounds.
CEBR’s forecasts assume that the incoming government will need to get the budget deficit down to 50 billion pounds by 2014/15. Without fiscal action the forecasts predicts a deficit of 143 billion pounds in that year.
Charles Davis, senior economist, CEBR, said that the risks to the scenario in the forecasts are from the world economy and from inflation.
The forecasts show low levels of labour cost inflation which should keep the consumer price index low enough to prevent the Monetary Policy Committee from having to raise rates until the economy is recovering, Mr Davis added.
Subscribe