An independent economic forecaster has predicted that the Bank of England will hold the base rate at a low level for years to come. Chief Economic Advisor to the Ernst and Young ITEM Club, Professor Peter Spencer, has declared his expectation that the cuts being made by the new coalition government will slow the pace of UK economic growth, prompting the Bank of England to keep interest rates low in an effort to stimulate growth.
The decision to keep interest rates low will, in the main, be dictated by declining levels of inflation, Professor Spencer predicts. Though he expects that inflation will remain above target for another 18 months, Professor Spencer expects that inflation will drop significantly once the effects of VAT increases and high energy prices dissipate. This falling level of inflation will prompt the central bank to hold the base rate at 0.5 per cent for some time in an effort to prevent inflation from dipping below 1 per cent.
The prediction provides yet another blow to savers, who have seen the returns they enjoy on their savings accounts slashed as banks cull any worthwhile deals in an attempt to preserve profit margins.
Bank of England Predicted to Keep Rates Low
Financial Services > e-banking > Banking news
Bank of England Predicted to Keep Rates Low
Wed, 28 Jul 2010
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