BoE to hold rates until at least May 2011: BCC

The Bank of England will keep interest rates on hold until at least May 2011 as the Government's recent spending cuts weigh on the economic recovery, the British Chambers of Commerce believes.

BCC Chief Economist David Kern says the tough fiscal policy has made risks of a double-dip recession "even greater", Bloomberg reports.

"It makes it more necessary, policy wise, for the Bank of England to keep interest rates low," Kern says.

"The biggest worry is the recovery in services. This year the recovery is more or less in place. The biggest hits for the economy and for jobs will actually come very late this year and early in 2011."

Former MPC member David Blanchflower has also highlighted the risk of a double-dip, after the Government last month unveiled £113bn in expenditure cuts and tax increases.

The BCC forecasts the economy will expand between 0.6% and 0.7% in the second quarter, and grow at the same pace in the three months through September. The economy expanded 0.3% in the first quarter.

MPC member Andrew Sentance last month became the first rate setter to vote for an interest rate rise in nearly two years, citing resilient' inflation.