CEBR predicts £100bn in QE and no rates change

NEW CEBR forecasts taking into account Wednesday’s Comprehensive Spending Review show growth slowing in 2011 but increasing thereafter as the recovery speeds up.

It has forecast growth of 1.6 per cent in 2010, 1.3 per cent in 2011, 1.4 per cent in 2012, 1.8 per cent in 2013 and 2.4 per cent in 2014.

Its forecasts include an additional £100bn in quantitative easing and the base rate of interest remaining at 0.5 per cent until at least late 2012.

The CEBR says that, given the normal margin of forecasting error, these forecasts imply a one in ten chance of negative growth for the UK economy in 2011.

However, it remains confident that the strength of emerging economies will prevent a double dip recession. The chance of negative growth in the first quarter of 2011, directly after the Vat hike, stands at 50 per cent, with the CEBR forecasting growth of just 0.1 per cent.