The British economy will escape a ‘double dip’ this year, but households face a tight squeeze on living standards from higher-than-expected inflation, rising interest rates and tax rises, according to forecasts from a leading employers' organisation.
With VAT rising to 20 percent yesterday and consumer confidence hitting record lows, a sluggish property market and a drop in average house prices of 4 percent in 2011 completes the gloomy economic outlook.
The Confederation of British Industry (CBI) says the Bank of England needs to raise interest rates further and faster than previously thought, because of the impact of rising world commodity prices on inflation.
The bank rate, which currently stands at 0.5 percent, is seen at 0.75 percent by the spring of this year and is envisaged to rise steadily to 1.25 percent this time next year.
However, even at such levels, rates would be low by historical standards.
The pace of recovery in the UK economy has been slightly stronger over the past year than expected and faster than typical during the first year out of a recession, but that rapid pace of growth is not expected to continue over the next two years of recovery, CBI said.
0 comments:
Post a Comment