The Bank of England has signalled that interest rates will remain on hold for much longer than previously believed, as it forecast lower economic growth and inflation over the next two years.
In outlining the Bank’s new forecasts, governor Sir Mervyn King emphasised that they did not take account of worst-case scenarios from the eurozone debt crisis.
Sir Mervyn declined to commit to holding interest rates, currently set at 0.5 per cent, for a set period. On Tuesday, the US Federal Reserve indicated that short-term rates would remain at their current level for two years.
“The current market expectation of where Bank rate would be in 2012 is very close to where it is now,” he said. “So expectations have already got to that point without [our] having to make a specific commitment.”