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Economy improves, but savings rates could stay low

Economy improves, but savings rates could stay low

Category: Savings

Updated: 25/05/2010
First Published: 25/05/2010

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
Hard pressed savers could be set for a few more months of low interest rates, as the UK economy continues to struggle to get back on its feet.

According to the Office for National Statistics, economic growth during the first three months of the year was marginally better than originally thought, with output growing by 0.3%, rather than by the initial estimate of 0.2%.

However, despite the welcome upwards revision, the figure remained 0.4% down on the growth of 0.7% reported during the final three months of last year.

With positive economic growth having been recorded for the second quarter in a row, David Kern, chief economist at the British Chambers of Commerce, said this meant the threat of an immediate relapse was now less severe.

However, with the recovery still fragile and the international situation becoming more uncertain, he added it would be unwise to completely ignore the risk of a double-dip recession later in the year.

As a result, he said the government must persevere with firm measures, focusing on spending cuts rather than tax rises.

"Given the pressures still facing businesses, it must be extremely cautious to avoid measures that hamper business investment and growth.

"With the government focusing on dealing with the deficit, it is important for the Monetary Policy Committee to keep interest rates as low as possible for an extended period.

"An increase in interest rates in the near future could cause huge damage to a recovery that is still frail."

The call is bad news for savers who have already been experiencing difficulties in finding savings account rates offering an inflation beating return.

However, decent savings deals do remain out there.

Spending a little time and effort comparing the best savings accounts rates in the market is likely to turn out to be time well spent.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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