The latest Ernst & Young ITEM club quarterly forecast predicts the Bank of England Rate will remain on hold at 0.5% until 2014.
This is an influential group, who publish a quarterly forecast looking at prospects for the UK economy, inflation and interest rates.
They believe that the risks of overheating and deflation in the British economy have both been exaggerated.
Commodity price increases and the VAT rise to 20% in January are likely to keep price inflation, as measured by the Consumer Prices Index (CPI), above target during 2011. Ernst & Young believe that inflation will then fall below target from early 2012, when the VAT rise falls out of the inflation calculation.
They have forecast economic growth in the UK at 1.4% in 2010 and 2.2% in 2011.
Whilst recognising that the economy is likely to slow down over the winter, they refer to this as a likely ‘soft-patch’ rather than a double-dip.
Photo courtesy of wwarby.
