Interest rates might be hiked to compensate Brown overspend |
|
|
Published
:
Fri, 28 Oct 2005 11:05
|
The National Institute of Economic and Social Research (NIESR) has asked the government to either increase taxes or contain public spending by £10bn a year to correct a structural deficit. Inflation is also projected to remain above target for several years.
Economic review released by it states that the oil price rises, lower than expected consumer spending and stabilisation of house prices have made it revise its forecasts for economic growth down this year by one percentage point to 1.7%, which will be the weakest in last 10 years.
Mr Gordon Brown who is to present his pre-budget report in November has himself hinted that his own economic forecasts will be cut down.
Higher oil prices will ensure that inflation would be above the Bank of England's 2 percent target. It is predicted to be 2.6 per cent at the end of next year if policymakers leave rates steady at 4.5 percent, the report said.
However, NIESR director, Martin Weale, at a press conference said: "We are firmly not supporting any more interest rate cuts."
NIESR has itself been surprised by the magnitude of the slowdown. It attributed this to a forlorn investment climate more than the weak consumer spending which was lower than expected. Its study said: "The unexpected weakness in UK investment mirrors the puzzle of weak investment in the global economy, at time when interest rates are low and when companies do not appear to be cash constrained."
NIESR also cut down its growth projection for 2006 to 2.3 percent down from 2.5 percent forecast in July and 2.7 percent in April.
The ₤1.1 trillion British economy grew at an annual 1.6 percent in the third quarter, which is a 13-year low. The 39 per cent increase in crude oil prices this year drove the industry into a recession in the first half and inflation rate touched an eight-year high in September.
|
|
|
|
|
|
|
| Stock
Quotes * |
|
NASDAQ
|
|
1398.07 |
-137.50 (
-8.95 %)
|
| SYMBOL (
2008-12-02 ) |
| LAST |
CHANGE
|
| SYMBOL (
2008-12-01 )
|
| LAST |
CHANGE
|
|
INTEL CP
(
4:00pm ) |
|
12.56 |
-1.24 (
-9.16 %)
|
| SYMBOL (
2007-09-04 )
|
| LAST |
CHANGE
|
|
|
Print this Story
EU members told to coordinate tax, spending policies to avoid an euro crisis 