Interest rates ‘will not rise soon’

There is “no chance” that interest rates will be raised in the near future, an economist has said.

Senior economic advisor to the Ernst & Young Item Club Hetal Mehta remarked that Britain is unlikely to see the sort of inflation that would require the base rate to be increased anytime soon.

She noted that Bank of England governor Mervyn King recently stated he expects to have to write a letter to the chancellor explaining why inflation is below target and Ms Mehta argued that such a lack of cost pressure would justify more quantitative easing.

This situation could help those wishing to improve on their current borrowing deals by shopping around for a lower rate.

However, eventually the low rate and quantitative easing is likely to push up inflation and there is a “strong chance” of a rapid rise in the base rate if this happens, Ms Mehta commented.

In its most recent announcement, the Bank’s Monetary Policy Committee said it was maintaining the quantitative easing at £175 billion and keeping the base rate at 0.5 per cent.

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