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UK interest rates to stay at 0.5% until 2017

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UK Britain Union Jack Bunting 480

UK interest rates will stay at rock bottom per cent for another four years as the economy struggles to recover, according to a leading investment bank.

Citi says it expects rates to stay at 0.5 per cent until the middle of 2017 – a year longer than previously expected, according to The Mail.

The prediction would see interest rates held at 0.5 per cent for eight years, having been cut to the low back in March 2009.

Citi has also cuts its growth forecast for the UK in 2013 from 0.8 to 0.4 per cent and said output would only rise between 0.5 and 1 per cent in 2014.

Citi chief UK economist Michael Saunders says: “We think the UK will lose its AAA rating in 2013. The economy is likely to disappoint again in 2013. We expect that growth will stay weak in 2014.”

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Readers' comments (3)

  • Of course we will lose our AAA rating. The economy is based on the prudent bailing out the feckless – hence the predicted low interest rates.

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  • I agree we are likely to lose our credit rating but the reason is far more prosaic. We are in a Keynesian liquidity trap and in such a scenario the only fiscal policy which is likely to produce growth is increased government spending - the polar opposite of the policy being pursued. It's a bit like Micawber - if growth is above borrowing rates - happiness; if growth is below borrowing rates - misery.

    If we lose our credit rating it will be down to our perceived ability to service our debt not the level of debt per se. This servicing ability depends on economic growth - not contraction.

    Carney recognised the austerity policy is doomed to fail, hence his support of moving from an inflation to a growth target.

    Sooner we get rid of this crowd the better

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  • We're doomed

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