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BCC: Rates to rise in August
The Bank of England will raise rates for the first time in four years in August in a bid to dampen inflation, according to the British Chambers of Commerce.
The report predicts rates will increase to 0.75% in August, reach 1% by the end of the year and hit 2.75% by the end of 2012, the Daily Mail reported.
Meanwhile, the BCC has also downgraded its economic growth forecasts for this year and next.
It said the economy will grow by 1.3% in 2011 and 2.2% in 2012, rather than the 1.4% and 2.3% forecast in March and 1.7% and 2.5% expected by the Treasury.
However, the BCC does not think there will be a double-dip recession and remains fully behind the austerity package.
“A new recession will be avoided in spite of the tough deficit-cutting plan, and the recovery will gradually gather momentum,” the report said.
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“The government must persevere with implementing its fiscal plan. Eliminating our structural deficit over the next few years remains a top policy priority.”
The BCC expects the economy to grow by just 0.3% in each of the second and third quarters of this year before picking up to 0.6% in the final quarter.