Ignis chief economist Stuart Thomson believes that UK interest rates won’t rise until 2013 despite the “window of opportunity” for a change in February next year.
Thomson said raising interest rates in February 2012 would be a good move given that next year is going to be a difficult time for global economic growth, however, he warns doing so now would be like “kicking an economy when it is down.”
Thomson said that there will another round of quantitative easing in both the UK and the US, as this is the clear plan B for the nations’ governments.
He said: “Inflation will come down rapidly in February 2012 and for a brief period, there will be real income growth – so that will be the time to do it.”
“In the second half of 2012, there will be more quantitative easing and in 2013 there will be a surge in activity and the potential opportunity to increase interest rates,” he added.
He also said that the US is “living on borrowed time” as its 33 month business cycle reaches its climax at the end of this year. Thomson says future cycles will be far shorter.
Thomson said the economy in the eurozone will also slow down, especially Germany since it is highly dependent on demand elsewhere.