Interest rates form an important part of the Financial Planning mix, with the cost of borrowing directly influencing the amount of money most of us have to spend on discretionary items, savings and investments.
The first interest rate decision of the year takes place later this week and nobody expect anything other than rates on hold at 0.5%.
There is an outside chance that rates will be cut further to 0.25%, although in our opinion this is more likely to occur later in the year, should the economic outlook worsen.
Keeping rates on hold in January is made more likely by new data from the latest Markit/CIPS survey, showing poor performance in the construction sector which appears to have slipped into recession in the final quarter of last year.
Economists at Citi, a leading investment bank, believe interest rates will remain on hold at 0.5% until 2017 as the economy struggles to recover.
They were cut to this low in March 2009, so should the forecast prove accurate this would mean interest rates were held at 0.5% for eight years.
Citi also thinks the UK will lose its coveted AAA financial strength rating in 2013; a view that we share, with at least one of the three major ratings agencies set to downgrade the UK in light of poor economic performance in 2012.
Photo credit: Flickr/Daniel Morris
