Ernst and Young have said that they expect the Bank of England to keep interest rates at the record low of 0.5% until 2014. The leading economic forecaster said rates would need to be kept low to counter-balance the government’s spending cuts.
“A base rate of 0.5% will begin to look like the new normal,” Professor Peter Spencer from the Item Club said.
In March, 2009, the Monetary Policy Committee lowered the interest rate to 0.5% and it has remained unchanged since then.
The forecast also says the fiscal tightening measures proposed by the Government will not choke off recovery, but it will slow economic growth over the next two years.
