The Bank of England will not hike interest rates until 2013 as the economic recovery remains "pretty weak," former Treasury adviser Roger Bootle has said, a day after Governor Mervyn King dismissed an early rise due to the "sheer volume of debt in the economy."
Bootle, who is now an economic adviser at Deloitte & Touche, added in a report by the auditor it is "not out of the question" the Bank will need to issue more quantitative easing, according to Bloomberg.
He said in the report: "The underlying momentum of the economic recovery looks pretty weak. My central forecast is still that rates remain on hold throughout this year and next."
"It is not out of the question that the MPC will eventually need to give more support to the economy. But additional asset purchases, if they do come, are perhaps unlikely until 2012."
GDP will increase 1.5% this year and next, according to the report. Inflation will average 4.4% this year before falling to 1.8% in 2012.
GDP will increase 1.5% this year and next, according to the report. Inflation will average 4.4% this year before falling to 1.8% in 2012.
Bootle's comments come a day after Bank governor King said high debt levels pose "massive" economic challenges that would be exacerbated by higher interest rates.
"The economic consequences of high-level indebtedness now would become more severe if rates were to rise," King said yesterday at a committee of the European Parliament in Brussels.
"It is the main reason why interest rates are so low." He said the problem of leverage, "the sheer volume of debt in the economy, is still very large and this poses massive macro-economic challenges."
King added: "I think these macro-economic challenges will last many years."
Bank of England policy makers are split four ways over monetary policy.
The central bank probably will leave the key interest rate at a record low of 0.5% at the next rate meeting on 5 May, according to the median of 43 forecasts in a Bloomberg News survey of economists.
Source: Mortgage Solutions.
