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Interest rates forecast to stay at 0.5% until 2017

Interest rates forecast to stay at 0.5% until 2017

Category: Economy

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Interest rates have been forecast to remain at their record low of 0.5% until 2017 as official figures revealed the UK economy stagnated during 2012.

The investment bank Citi said it expects the Bank of England to keep interest rates at 0.5% for the next four years amidst a fragile economic recovery.

With rates having dropped to 0.5% in March 2009, if the prediction comes true, borrowers and savers will have experienced a full eight years of low interest rates and the accompanying feelings of pleasure and pain that they bring.

Those with a mortgage will be more than happy if the forecast comes to fruition, as it will mean the repayments on their loans are likely to remain low.

Savers, on the other hand, would not welcome the news, as the current environment of disappointing savings rates would persist for at least another four years.

Michael Saunders, chief UK economist at Citi, said: "The economy is likely to disappoint again in 2013, with little or no growth, sticky inflation and persistent deficits on both the current account and fiscal balance." Hot on the heels of the warning, official figures from the Office for National Statistics confirmed the UK economy effectively stagnated in 2012.

The Office said the level of output in the first three quarters of the year was little changed from the same period in 2011, but did note there had been considerable fluctuations from quarter to quarter, thanks to one-off events including the Diamond Jubilee bank holiday and the London 2012 Olympic and Paralympic Games.

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