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Interest rates 'to stay at 0.5 per cent for several years'

Date Added: 27/07/2010  

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Companies that are taking business debt advice have been told interest rates should remain at their current level for some time.

The Bank of England reduced interest rates to a historic low of 0.5 per cent in March 2009 and they have been unchanged ever since.

According to the Ernst & Young Item Club, the bank's Monetary Policy Committee should opt to keep the cost of borrowing at this level for the next three years.

Professor Peter Spencer, spokesman for the group, said: "We expect that UK growth will struggle to reach one per cent this year but will gradually speed up in the following years."

However, he said this estimate depends on whether the government will be able to implement the targets outlined in last month's Budget.

Professor Spencer added that a base rate of 0.5 per cent will eventually begin to "look like the new normal".

This comes after the Office for National Statistics reported that the UK economy expanded by 1.1 per cent between April and June 2010.

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