Long Recovery For UK Economy Forecast
The UK Britain faces a long recovery and growth will be small in 2010, but the Bank of England is still set to raise interest rates early in the coming year, according to the CBI (Confederation of British Industry).
The lobby group have predicted, in their latest quarterly economic forecast, that the Bank of England will start raising interest rates from the record low of 0.5% from next spring with an expected 2% to be reached by the end of the year.
Despite forecasting growth of just 0.3 percent in the first two quarters of 2010 the CBI believe that policy makers will be eager to return rates to a more normal level.
“We’re not suggesting rates will be going back anywhere near neutral, around 5%, but 2% is still stimulatory for the economy.” CBI chief economic adviser Ian McCafferty told a news briefing.
City economists are predicting that the central bank will not start tightening policy until late 2010 or beyond, as the Bank of England has forecast that the weak economy will put pressure on inflation, pushing it below the 2% target by mid-2010.
McCafferty also believes the central bank will start releasing its £200 billion asset buying programme focused on lifting the UK out of the downturn in late 2010.
The CBI estimate that the economy will grow by 1.2% next year and 2.5% in 2011, which is way below government forecasts.
The CBI also warned of hurdles on the way to recovery and said it could be years before the economic output returned to its pre-recession level.
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Tags: Bank Of England, Cbi, Confederation Of British Industry, Economic Forecast, Economic Output, Economic Recovery, Government Forecasts, Inflation, Interest Rates, Recession, Uk Economy
