The Office for Budget Responsibility has predicted interest rates will not rise until 2019 and could even fall.
In its Economic and Fiscal Outlook, released prior to this week’s Budget, the OBR states: “In the short time since our November forecast, economic developments have disappointed and the outlook for the economy and the public finances looks materially weaker.
“Global stock markets and commodity prices have fallen, while GDP growth has slowed – especially in value terms. A promising pick-up in productivity through most of last year was almost entirely reversed in the fourth quarter, while growth in average earnings has slowed again.
“Outside forecasters – including the Bank of England and the OECD – have lowered their growth projections significantly. And financial markets have pushed their forecast of the first rise in interest rates out to 2019 and see a cut as more likely in the near term.
“The data available in November showed a pick-up in productivity growth in mid-2015, consistent with our assumption that the receding financial crisis would exert less of a drag and that trend productivity growth would return to its pre-crisis average rate by the end of the forecast.
“But more recent data suggest that this was another false dawn.”