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Interest rates to stay at 0.5% until 2014

The Bank of England will have to keep interest rates at their current record low of 0.5% until 2014, according to economic forecaster the Ernst & Young Item Club.

The forecaster has said that the rates would need to be kept low to balance the coalition government's spending cuts.

"A base rate of 0.5% will begin to look like the new normal," said Professor Peter Spencer from the Item Club.

"To prevent CPI inflation moving below 1% it will be necessary keep the Bank base rate low at 0.5% for much longer than the Office for Budget Responsibility (OBR) and the markets have anticipated."

The OBR has said that it expects rates to start to rise next year. Interest rates have stood at their current record low of 0.5% since March 2009.

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Post Date: July 26th, 2010