Rates on hold till mid-2016

Posted at September 29, 2015 | Categories : News

New forecasts from Cebr – the Centre for Economics and Business Research – suggest that the Bank of England won’t raise interest rates until the middle of next year. Previously, the think tank expected an increase in February.

Cebr also expects the UK economy to grow by 2.5% this year. However, growth is expected to slow to 2% in 2016 and then average just 1.7% over the years 2017-2020, whereas the Office for Budget Responsibility expects growth to remain above 2% over this period. There are significant downside risks to the forecasts – the global economic slowdown, driven by substantial weakness in emerging markets (most notably China), is holding back export prospects and curbing business investment. If the world economy continues to falter, Cebr suggests these weights on growth will become even bigger.

The forecase also questions the sustainability of the current economic recovery, predicting that household spending, not trade or investment, will account for the clear majority of the growth seen over the next five years., net trade will act as a drag on growth over this timeframe as the UK continues to import far more than it exports. The current account deficit – a measures of the UK’s trading position with the rest of the world – is expected to average an enormous £77 billion per annum over the period 2015-2020, according to Cebr.