UK growth – how are the interest rates?

London financial district, UK GrowthA consensus of almost fifty economic experts predicts that Britain will show a growth rate that exceeds the rest of the G7 nations in the coming quarters, but the Bank of England is in no rush to increase interest rates, which might slow the rate of recovery.

The poll agrees with online Forex trading positions that the Bank of England will hold interest rates until the second quarter of 2015, raising them then by 25 base points, with a further increase of the same magnitude in the third quarter.

Deputy Governor Charlie Bean has already stated that rates were unlikely to exceed 2.5 percent in the next three years.

General expectations are that Britain’s gross domestic product will grow at roughly 0.6 percent every three months, through to the end of August 2015. If this proves to be the case then Britain is on track to reach the same volume it attained before the banking crisis, by the beginning of July this year; which, out of the top seven industrialised nations, would make it the fastest expanding economy.

This follows closely on Mark Carney’s comments to the Inflation Report Hearings that despite the vigorous bounce back of the UK economy since last year, there was not a danger of it over heating. Spare capacity in the economy is currently judged to be more than 1.5 percent of GDP which allows for interest rates to remain unchanged for some time.

Another factor is that any strengthening of the pound would act to cause the rate of recovery to slip. Combined with a slow but steady recovery in the Eurozone, this means that the euro should hold its position against the pound, at least in the short term. The online Forex traders’ view of the Euro remains cautious but positive.

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