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UK interest rates to stay at 0.5% until 2017

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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.

UK Britain Union Jack Bunting 480

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 (8)

  • And on that cheery note, Happy New Year to all UK brokers.

    Can't we send all economists into the Big Brother basement or better still, off Tom Daley's 10m board? Preferably onto Clare Balding.

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  • AT LEAST 70% of economist have got forecast wrong over the last 5 years. So not worried about it.

    Its def better than 2007/2008!

    Also it annoys me when forecasters use 'weak' and 'disappoint' just to gain a bit of publicity. These companies forecasting are part of the problem. Scaremongering.

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  • The Bank of England should not have cut rates so drastically in 2009. It has not learned from Japan where an almost zero base rate has caused stagnation for years. A low base rate corrupts the price of money and the money supply, so now we are in a position where the 'treatment' is killing the patient!

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  • Happy Days, tracker mortgage base +.75% dont want the rate going anywhere soon!!!

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  • @dave | 8 Jan 2013 4:48 pm

    Selfish, shortsighted, etc etc etc springs to mind.

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  • I said this 3 years ago and nobody pays me £500k a year to be an analyst. What happened to the "green soots of recovery"
    I think they were really weeds. People who want rates to rise are equally selfish as they want better investment returns at the expense of homeowners with mortgages. The chosen tribe have engineered this problem and have profited massively.

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  • Shaks | 9 Jan 2013 11:47 pm

    Fair enough Shaks, but analysts do not get 500k a year for one, and secondly, I want rates to rise - not for personal gain, but for us to exit this fools paradise of cheap money and economic stagnation. Intervention in the markets has to stop before we see any real recovery. Ask anybody who lives in Japan what 10 years to 0% rates feels like.

    Sure, if rates go up some businesses will fail and some homeowners will get repo'd, but thats life. The last recession was a text book example of how markets revcover when left to take the pain and find their own level.

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  • Not sure how low interest rates can be blamed for stagnation. Surely by reducing the cost of borrowing and servicing debt scope exists for money to flow through the economy. Sentiment and lack of willingness to lend are part of the current malaise, higher interest rates now would just compound the problem. Comparing the current situation with the late 80s/early 90s is comparing apples with pears. Then high inflation (double digit - nt just above 2%) was the cause of high interest rates needed to cool the economy. Ineptitude by the Major government thae meant interest rates had to stay high to artificially peg the pound to a very strong DM within the ERM. The economy only rebounded after Black (Golden) Wednesday when the pound fell out of the ERM and interest rates halved overnight.

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