CBI anticipates UK interest rates to rise to 0.75% in Q1 2015

12th May 2014

The Confederation of British Industry (CBI) has predicted that UK interest rates will increase to 0.75 per cent from 0.5 per cent in the first three months of 2015 as economic growth accelerates.
 
This forecast has been brought forward from an earlier prediction of a rate rise in the July to September 2015 period.
 
The business lobby group is expecting growth of three per cent in 2014, followed by an estimate of 2.7 per cent in the following 12 months.
 
However, the CBI warned that political uncertainty remained “a major risk to the recovery”.
 
John Cridland, director-general of the CBI, said: “Businesses recognise the realities of election time but want all parties to ensure their policies make a positive difference.
 
“Politicians must be wary of the risk of headline-grabbing policies that weaken investment, opportunity and jobs.”
 
The improved forecast for 2014 growth was due to increased business investment, according to Mr Cridland, who spoke with BBC Radio 5 Live this week:
 
“We’re sensing entrepreneurs across the whole economy – service, manufacturing, exporters – and even the domestic economy feeling more confident [and] making more investment,” added Cridland.
 
The CBI joins both research organisation, the National Institute of Economic and Social Research (NIESR) and the Organisation for Economic Co-operation and Development (OECD) in upgrading growth forecasts for the UK.
 
The NIESR also said that the UK economy was close to regaining its pre-financial crisis level of economic activity.
 
In order to “meet the urgent need for homes” the CBI has called for the Government to push on with its housing supply.
 
“We have to remain alert to the risks posed by unsustainable house price inflation,” added Mr Cridland.
 
“While housing transactions are still running almost 30 per cent below their last peak in 2006, they are picking up steadily.
 
“Outside London, prices remain around two per cent below peak figures with an even greater difference when you move outside the South East [of England].”

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