When will interest rates rise?

The Bank of England base rate has remained at a historic record low for 30 consecutive months, the questions on everyoneís lips now is when will it rise?

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The Bank of England has resisted raising interest rates to tackle the growing inflation in case it caused further damage to the economy. 

Rates were first lowered in March 2009 and many economists now think that there will not be a rise for at least another year due to the fragile state of the economy.

The debt crisis in Europe and the US will affect the UK economy and Banks fear that a rise in rates could set the economy back into a recession.

The Bank of England has cut its UK growth forecast for 2011 from 1.8% to 1.5%, fearing that the European debt crisis, as well as the problems in the U.S, could overshadow the world economy.

The Monetary Policy Committee (MPC) have announced that they could freeze the rate further until 2013.

Considering the recent turbulence within the stock market, market experts are even suggesting that interest rates will not rise until late autumn of 2014.

It is difficult to predict exactly when rates will rise but that has not stopped people speculating. 

In June, many said that a likely increase would be in July or August 2012. At one point earlier this year analysts were certain of a rise just four months ago.

Sir Mervyn King, Governor of the Bank of England, and his committee voted 7-2 in favour of no rise in both June and July.

The prospect of an extended freeze has already driven down fixed mortgage rates to a record low as lenders factor in long spells of having a rock-bottom base rate.

Ian McCafferty, Confederation of British Industry Chief Economic Adviser, said: “The flow of economic news this month has made worrying reading for the MPC, with growing evidence of a softening of the global economy combined with rising inflation expectations in the UK.

“While we continue to believe that the UK economy will pick up into 2012, we won’t see clear evidence of this in data for some months yet, leaving the Bank unlikely to alter its policy before the end of the year.”

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