UK interest rates to stay at record low 'until 2014'

A base rate of 0.5% will begin to look like the 'new normal' with hikes unlikely until 2014, according to a leading economic forecaster.

The Ernst & Young Item Club said rates would need to be kept low to counter-balance the Government's spending cuts. Professor Peter Spencer, ITEM's chief economic adviser, added the Bank may even have to restart its £200bn quantitative easing programme, the Telegraph reports.  He said: "Monetary policy [will have to] remain very loose in order to offset the dampening effects of fiscal policy. Further asset purchases cannot be ruled out if there are signs that the recovery is relapsing." ITEM's interest rate forecast is in contrast to that of the Office for Budget Responsibility (OB...