Interest rates to stay at 0.5% for years, say experts | Money | guardian.co.uk

Interest rates to stay at 0.5% for years, say experts | Money | guardian.co.uk

Economists, fund managers and mortgage market experts are predicting the base interest rate will remain at the record low level of 0.5% until 2014, and that it may not rise for another three to five years, despite March's shock rise in inflation.

CPI rose from 3.4% to 3.5%, a small rise but significantly higher than the government's target rate of 2%. This prompted some speculation that the Bank of England monetary policy committee (MPC) might raise interest rates in an attempt to curb inflation: former MPC member Andrew Sentance wrote in the Sunday Telegraph that "rising interest rates could soon be back on the agenda".

But other economists and financial experts are doubtful there will be sufficient improvement in the UK economy to enable the MPC to raise interest rates before the end of 2013 at the earliest.

Robert Gardner, chief economist at Nationwide building society, said there was too much volatility in economic data to enable the MPC to gauge accurately the strength of the economy. This volatility would be exacerbated in 2012 by the Olympics and the diamond jubilee.

"The Bank of England will want to make sure [the economy] is really gaining momentum before it risks raising interest rates," he said.