Forecast of 8% Interest Rates by 2012 “alarmist”

A forecast that UK interest rates will reach eight per cent by 2012 is “alarmist” and makes the unlikely assumption that there will be a double-dip recession followed by a boom and high inflation, the British Chambers of Commerce (BCC) has said. The forecast was made by Andrew Lilico, chief economist at think-tank the Policy Exchange. “Once the economy gets growing sustainably, there will be a huge expansion in the money supply, which will lead to inflation. And once inflation rises, interest rates will rise rapidly as well.” Lilico added that to keep inflation down, interest rate rises to eight per cent are likely by 2012. If interest rates do go up, it could make loans and commercial mortgages even less appealing for small firms in a market that is already sluggis... »