
Money markets are currently pricing in a 25 per cent chance of a rate rise.
The CBI predicts that interest rates will remain at 0.5 per cent until the second quarter of this year. They will then edge up gradually, reaching 2.75 per cent by Q4 2012. “With this gradual rise in interest rates and the VAT increase falling out of the equation from January 2012, inflation is forecast to settle close to target throughout 2012,” comments Ian McCafferty, CBI chief economic adviser.Walker says the government should introduce a fuel duty stabiliser, which would remove one of the key drivers for inflation. Phil McCabe at the Forum of Private Business also hopes interest rates stay at 0.5 per cent. “It is the only slight control that can be exerted over bank lending rates,” he says. “And even then, our research shows that commercial lenders’ rates of interest are often well above base.”
Share this story