The Bank of England won’t raise its interest rate until 2013 as the economic recovery’s momentum stays “pretty weak,” Deloitte & Touche LLP said.
“The underlying momentum of the economic recovery looks pretty weak,” Deloitte’s economic adviser Roger Bootle, a former adviser to the U.K. Treasury, said in a report today. “My central forecast is still that rates remain on hold throughout this year and next.”
Bank of England policy makers have split four ways on whether to raise interest rates or add stimulus to aid the recovery at a time when inflation remains at twice the Monetary Policy Committee’s 2 percent target. Britain’s economy grew 0.5 percent in the first quarter, just enough to offset the contraction in the final three months of 2010.
“It is not out of the question that the MPC will eventually need to give more support to the economy,” Bootle said. “But additional asset purchases, if they do come, are perhaps unlikely until 2012.”
Bootle expects gross domestic product to increase 1.5 percent this year and next, according to the report. Inflation will average 4.4 percent this year before falling to 1.8 percent in 2012.
The Bank of England kept its benchmark rate unchanged at 0.5 percent last month. The rate will rise by 25 basis points by November, according to forward contracts on the sterling overnight interbank average, or Sonia, compiled by Tullett Prebon Ltd.
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