The Bank of England should hold off from raising interest rates next month, according to a forecast of body.
Bank Governor Mark Carney said that rates could climb in the “relatively near term”, with many analysts expecting a rise in the month of November.
However, EY Item Club said that such a move risked hurting the uk’s “fragile prospects of the economy”.
The group called on the bank to wait another year before raising the benchmark rate from 0.25% to 0.5%.
This comes after the British Chambers of Commerce and the rating agency Standard & poor’s suggests that the economic growth was not strong enough to justify a rise in rates.
EY Item Club, which uses the treasury’s forecasting model, predicted that GDP growth would slow to 1.5% this year and 1.4% in 2018. Stronger foot’
It was said that the expectations were high that the Bank’s Monetary Policy Committee (MPC) could raise interest rates in the next meeting of November 2, but urged that they wait for the economy to pick up.
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“While it is understandable that the MPC wants to gradually normalize interest rates from their current emergency levels’, we believe that it would be better to do it once the economy is on a more equal footing,” said Howard Archer, chief economic advisor to the EY Item Club.
The last time rates were raised was in July 2007, before the financial crisis. Since then interest rates have been kept low to boost the economy, keeping the cost of borrowing down.
The Bank cut rates 0.5% to a historic low of 0.25% – after the Brexit vote on a motion designed to stimulate the economy.
The recent low unemployment figures and stronger inflation have made a rate increase more likely.
Mr Carney told the BBC at the end of September: “If the economy continues on the track that has been, and all the indications are that, in a relatively short period of time it can be expected that interest rates will rise.”The consumer squeeze
The Bank is responsible with the use of interest rates to keep inflation at 2%. It is currently at 2.9%, with the latest figures due out Tuesday.
But according to the EY Item Club’s forecasts, inflation will return to 2% by the end of next year, as the effects of the weakening of the pound wear and tear.
The forecasting group said that consumer spending would be slow for a little girl of nine years, in 2016 – 2.8% and 1.5% this year, due to inflation, salary increases for the poor, welfare cuts and a slow housing market.
The latest trade figures of the industry, released on Monday, indicate the number of visitors fell by 1.2% in September.
Helen Dickinson, executive director of the British Retail Consortium, said: “For the third consecutive month, the majority of shopping destinations suffered a decline.”
The British chamber of Commerce said Friday that it was “extraordinary” the Bank was considering the possibility of an increase of rates of economic growth that has been muted.
Earlier this month, Standard & poor’s said that it was “a little skeptical” the uk economy needed an interest rate rise.
However, others have argued that the economy is strong enough to begin to move out of the emergency rates.