Deputy governor of the Bank of England says interest rates are unlikely to “rocket up”

Interest rates are likely to remain low in a slow recovery environment, Mr Bean said yesterday.

Responding to a national newspaper story quoting 'experts' predicting interest rates staying at a record low for five years, the deputy governor said such predictions were 'foolish' and stressed forecasts were done with a degree of uncertaintly.

He said: 'We don't know what is going to happen in the next year, let alone the next five years. There is obviously a certain degree of uncertainty about what is going to happen in the eurozone even in the next couple of months.

He said: 'There is political uncertainty there. Who is going to win the Greek election, what is going to happen after that. Making hard and fast predictions is foolish. But as a general statement it seems reasonable to suggest the UK economic recovery, which we hope will resume as we go through this year as inflation comes down, should help to boost the growth of real household incomes and that should give support to consumer spending and that might also encourage firms to do a bit more investment.

He added: 'It is reasonable to think given the headwinds facing the economy, tight credit conditions associated with the banking system which is still repairing its balance sheets, fiscal consolidation which still has some years to run, coupled with all the uncertainty in the external environment, the recovery is going to be a slow one rather than a sharp bounce back and in that environment interest rates are more likely to remain low than rocket up. But what is going to happen will depend on how events unfold. All sorts of unexpected things not only could happen, but almost certainly will happen.'

'Who knows what the next few years will bring, but I can promise it won't be tranquil,' he said.