UK interest rates to remain ultra low until 2017?

UK interest rates to remain ultra low until 2017?

Saw this and hoped you would find it interesting, Bank of England also held the base rate again today. Mark

 

Mortgage Solutions | 07 Jan 2013 | 10:08 Hannah Smith

UK interest rates will stay at historic lows for four more years as the economy struggles to return to normal growth levels, Citi has predicted.

The investment bank said it expects the Bank of England to maintain rates at 0.5% until mid-2017, the Mail reports.

The central bank cut rates to this level in March 2009 at the height of the financial crisis.

Citi cut its 2013 growth forecast from 0.8% to 0.4% and said output will rise by only between 0.5% and 1% in 2014 – far below the Treasury’s estimates.

It said the Bank of England will leave interest rates at 0.5% until mid-2017 – a year longer than expected – as it battles to restore the economy to health.

Citi also said it expects ratings agencies could strip the UK of its AAA rating next year as the government and Chancellor George Osborne(pictured) grapple with its mounting debt.

Michael Saunders, chief UK economist at Citi, said: “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,” according to the paper.

Standard & Poor’s, Moody’s and Fitch – the world’s three biggest agencies – have all put the AAA rating on ‘negative outlook’, and several economists expect to see a downgrade in 2013.

Last week leading thinktanks warned the UK could be teetering on the brink of a triple-dip recession.

The Centre for Economics and Business Research (CEBR) said the UK will probably have negative growth in Q4 2012 and could see a weak Q1 2013 as well. It put the UK’s chance of slipping back into recession at 50/50 unless the government manages to stimulate growth.

Meanwhile, the British Chamber of Commerce (BCC) urged the government to make bold moves to steer Britain away from the “point of no return”.

 

Could be good news if you have a mortgage but I hope we do not have a triple-dip recession! Mark

Inflation sticky at 2.7% in November

Inflation sticky at 2.7% in November

I hope you find this useful, just keeping you updated! – Mark

Mortgage Solutions | 18 Dec 2012 – Vicky Hartley

UK CPI inflation remained at 2.7% in October, broadly in line with economists’ expectations, as RPI inflation fell from 3.2% to 3%.

The Office for National Statistics said CPI was subject to both “significant upward and downward pressures” between October and November.

Food, non-alcoholic beverages, gas and electricity prices exhibited the most upwards pressure on the headline rate, with falling fuel prices among the largest downwards pressures.

The data means CPI inflation remains in excess of its 2% target, and policymakers are beginning to broach the possibility of the threshold being scrapped or modified in future.

Incoming Bank of England governor Mark Carney suggested earlier this month that it could be beneficial for central banks to target nominal GDP (a mixture of GDP and inflation rates) rather than simply focusing on price stability.

M&G head of retail fixed income Jim Leaviss has said the changing debate is evidence of a concerted “central bank regime change”.

Sterling strengthened slightly to $1.6216 against the dollar on the latest inflation figures, towards the top end of its 2012 range.

The currency has strengthened against the dollar in recent days as the Federal Reserve unveils more easing measures and the Bank of England is seen as being more reticent to ease.

RBS analysts have said this month that betting on a fall in the GBP/USD exchange rate is one of their top trades of 2013, anticipating that the UK’s deteriorating fiscal position will put pressure on the pound.