The Centre for Economics and Business Research (CEBR) has predicted years of low interest rates, tax rises and spending cuts for the UK in the latest economic forecast.
The CEBR believes that the record low interest rate will remain at its current level of just 0.5% until at least 2011 and do not foresee the rate increasing to any more than 2% by 2014.
The pound will suffer further says the report, predicting a low of $1.40 and crucially falling to new lows against the Euro where the pound could ‘possibly’ fall to under one euro.
Further quantitative easing of £75billion-over the already announced £175billion, is also predicted.
The CEBR base their predictions on the government managing to slash the UK budget deficit by £100billion over the next parliament, with £80billion coming from spending cuts and £20billion from rises in taxes.
Douglas McWilliams chief executive of CEBR says;
“We are likely to see an exciting policy mix, with the fiscal policy lever pulled right back while the monetary lever is fast forward. Our analysis says that this ought to work. If it does so, we are likely to see a major rerating of equities and property which in turn should stimulate economic growth after a lag.”
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