The Bank of England probably won’t raise interest rates until 2014 because of the government’s budget squeeze according to Ernst & Young LLP’s Item Club. They predict the gross domestic product (GDP) will rise 2.2 per cent next year and that economic recovery will be slow and patchy.
Peter Spencer chief economic adviser to the Item Club and a former UK Treasury official, will say in a statement tomorrow, “Growth will struggle to reach 1 per cent this year but will gradually speed up in the following years to give the UK a high-quality recovery based on trade and investment.”
They predict the economy will see a 2.8 per cent growth in 2012 compared with their earlier prediction of 3.4 per cent made in April. The following year prediction is 2.9 per cent versus the earlier 3.1 per cent made in April also.
Ernst & Young LLP’s Item Club uses the same forecasting model as the UK Treasury.