CBI predicts interest rates will hit 2% by end of 2010
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The Confederation of British Industry predicts interest rates will start to rise in spring, hitting 2% by the end of 2010 and then no further rises in 2011.
The trade body says that interest rates will start to rise as the Bank of England withdraws the monetary stimulus it has provided in order to minimise the risk of inflation.
The Bank base rate is expected to reach 2% by the end of next year, with no further rises during 2011, with the aim of boosting any recovery as fiscal policy begins to tighter.
It also says that The UK economy is expected to exit the recession in Q4 of 2009, but thereafter growth will remain subdued and GDP is unlikely to have reached pre-recession levels by the end of 2011 - a sign it says of the depth of the recession and the weakness of the economic recovery.
Ian McCafferty, chief economic adviser at the CBI, says: “The UK economy faces a number of structural hurdles over the coming two years, and this recovery - like that of the 1980s - will be relatively drawn out.
“Credit conditions will remain difficult as the banks slowly nurse themselves back to health, consumer spending will be shaped by the need to rebuild savings, and the public sector will soon have to tighten its belt. All three factors will act as headwinds to growth.”
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Readers' comments (4)
Anonymous | 21 Dec 2009 5:08 pm
Until we stop funding civil servants etc. pensions we will not see " THE GOOD TIMES" again.
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Anonymous | 22 Dec 2009 10:22 am
I think they are mistaken in their views. Interest rates are unlikely to rise by more than 0.5% during 2010. Inflation is due to increase in early spring before falling back. With huge cuts in public sector pay coming in late summer the economy cannot withstand mortgage payments in effect doubling. Hopefully the BOE will be looking longer term than spring / summer and set aside the 2% infation target.
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steve Sykes | 23 Dec 2009 10:59 am
Do they know, does anyone know?. I think not. CBI were the same people saying rates would not rise until 2014.
If we get a doubling of interest rates within 12 months then we will have problems similar to 1991. Do they ever learn.
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Anonymous | 25 Dec 2009 3:24 pm
I sincerely hope they dont live up to their initials (CBI-Cant Be Inaccurate)
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