Easy money to last until at least 2016 as growth prospects wane
LOW INTEREST rates look set to stay for the rest of the year, with the growth outlook for the UK worsening and a major international organisation urging the US not to hike rates this year.
The UK economy may only grow by 2.3 per cent this year, the British Chambers of Commerce, which represents over 90,000 businesses, said today.
It marks a downgrade from its earlier forecast of 2.7 per cent. It follows a sharp slowdown in the growth of the UK’s dominant service sector, implied by a survey earlier this week.
The Bank of England’s monetary policy committee (MPC) yesterday decided to keep its headline interest rate at 0.5 per cent.
“‘Noflation’, sterling’s recent strength and evidence of weakness in some of the UK’s major export markets still point to the majority of the MPC seeing little need to raise the Bank Rate this year,” said Martin Beck, senior economic adviser to the EY Item Club.
Meanwhile, International Monetary Fund (IMF) chief Christine Lagarde said that before hiking interest rates the US central bank, the Federal Reserve, should wait for “more tangible signs of wage or price inflation than is currently evident. In other words, we believe a rate hike would be better in 2016.”
The IMF slashed its 2015 growth forecast for the US to 2.5 per cent from 3.1 per cent.