Interest Rates Could Stay Low Until 2017, Says Citi

Investment bank Citi has predicted that the Bank of England will maintain interest rates at 0.5 per cent until mid-2017 as the country fights to get back to economic health.

Its growth and output forecasts are also far below those of the Treasury and it has recently cut its growth forecast for the year from 0.8 per cent to 0.4 per cent whilst claiming that output will rise by only between 0.5 per cent and 1 per cent next year.

The investment bank also said that it expects ratings agencies to strip the UK of its triple A rating this year because of the Government’s mounting debt and because growth will be much weaker and take longer to achieve than expected.

In fact, the world’s three biggest ratings agencies, Moody’s Standard and Poor’s and Fitch have already put the AAA rating on ‘negative outlook’ amid fears of a triple dip recession.

In the meantime, other agencies foresee a weak first quarter this year and the Centre for Economics and Business Research (CEBR) has put the UK’s chance of slipping back into recession at 50/50 unless something is done to stimulate growth.

For this reason, many analysts and fund managers believe that equities are the way forward this year, with some favouring UK equities in particular, as valuations based on the price-earnings ratio, mean that the next 10 years should provide positive real returns for investors, possibly into double-digits per annum, despite the economic climate.

However, according to Barings, more than three in five financial advisers are steering their clients towards emerging markets equities, particularly in Asia, apart from Japan.

If you are looking to make an investment this year, but you’re concerned about interest rates following the latest news, or you’re not sure what the best investment would be for you, come and speak to myself or a member of our team. We’re always on hand to offer impartial, honest and friendly advice, to help you achieve your financial goals.

Marc Stemmer offers financial planning advice to businesses and individuals; helping them to achieve their financial goals.