Interest rates will stay at rock bottom in the years to come as the Government tackles the UK's wounded economy, a report predicts.
The cost of borrowing is to remain at its record low of 0.5% until at least 2011 and remain below 2% until 2014, according to a study by the Centre for Economics and Business Research (CEBR).
A weaker pound, slumping to just 1.4 US dollars and possibly falling below parity with the euro, is also expected (see the Cheap Travel Money guide).
The CEBR predicts the next government will have to engineer around £100 billion in tax rises and spending cuts to deal with the country's deficit.
Political parties are already vying to explain how they plan to address the dire public finances after next year's general election.
The report forecasts that should the Conservatives win power this will mean £20 billion in extra taxes with an £80 billion reduction in spending.
A future government will have to wrestle the budget deficit down to £50 billion by the 2014/15 financial year, a tough challenge as the CEBR also warns the deficit will be £143 billion in that year without action.
The report also predicts the Bank of England will increase its quantitative easing (QE) programme – essentially printing money – by another £75 billion.
This month the Bank voted to not to increase its programme to boost the money supply from its current £175 billion.
The CEBR expects UK economic growth between 2009 and 2014 to average 1.4%, although it predicts the hefty budget cuts to get the country's finances back on track will cause the figures to dip in 2011 and 2012.
After that, weak sterling and low interest rates are predicted to encourage investment, halting the trend for savings and boosting exports.
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