Interest rates set to rise in 2015

Interest rates will rise in the second half of 2015, a year earlier than the Bank of England planned, according to today’s forecast from the National Institute of Economic and Social Research (NIESR).

The think-tank estimates  the economy will grow by 1.4 per cent this year, accelerating to 2 per cent in 2014.

The Bank of England has said that it will not raise the base rate until unemployment falls at least below 7 per cent.

In August it said it did not expect this threshold to be reached until the second half of 2016. But NIESR forecasts that there is a 20 per cent chance that joblessness will fall to that level, from its present rate of 7.7 per cent, by the first quarter of next year.

The think-tank expects GDP to regain the ground it lost in the 2008-09 recession by 2015. It is presently 2.5 per cent smaller but NIESR added that GDP per capita would still be well below its 2008 level in two years’ time.