Economy
Economists suggest interest rates will remain at 0.5% in 2014
Interests rates in the UK are likely to remain at 0.5% throughout 2014, according to a group of top economists polled by the BBC.
A large majority (93%) thought that the interest rate would remain the same, but half believed it was likely that it would rise in the second half of 2015.
The rate of interest was fixed by the governor of the Bank of England, Mark Carney, in an August report. He promised to keep interest rates low by maintaining a “stimulative stance” on the economy, until unemployment had fallen below 7%.
Two-thirds of those polled by the BBC believe that wages will increase further than inflation throughout the next 12 months, and around 40% thought that unemployment will fall below the benchmark set by Carney. Half however, feel that this goal will not be met until 2015.
Some economists anticipate that the Bank of England will move the goalposts by lowering the rate of unemployment required before interest rates will be reconsidered.
Gavyn Davies from Fulcrum Asset Management told the Financial Times, “The 7% unemployment threshold is already redundant and will have to be dropped or reduced.”
According to the poll, many economists believe that the eurozone crisis is not yet over and could easily be reignited.
Further reading:
Bank of England: interest rates to remain low until unemployment drops
How renewable energy can help us beat inflation
Autumn statement: the reaction
Mark Carney: finance that becomes disconnected from the economy is ‘useless’