Interest rates 'set to remain low'

Interest rates are likely to remain at a low level for a number of years, a recent report has suggested.

The economic forecast from the Centre for Economics and Business Research (CEBR) predicts that the rate will stay at its current level of 0.5% until 2011, reaching 2% in 2014.

The CEBR also forecasts that the pound is likely to weaken further, with the possibility that it could fall below one euro.

The report makes the assumption that the UK budget deficit will be cut by £100bn over the next parliament, with a combination of £80 billion of spending cuts, and tax rises to the tune of £20 billion.

Douglas McWilliams, CEBR chief executive, said, 'We are likely to see an exciting policy mix, with the fiscal policy lever pulled right back while the monetary lever is fast forward'.

'We are likely to see a major re-rating of equities and property which in turn should stimulate economic growth after a lag'.

The Bank of England has held interest rates at a record 0.5% for seven consecutive months.