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Rates 'could hit zero and stay there'

Jan 29 2009

Interest rates could hit zero per cent and stay there for the rest of 2009 and throughout 2010, an expert has predicted.

Charles Davis, senior economist at the Centre for Economics and Business Research (CEBR), says the organisation thinks the rate will drop to zero per cent and will not increase rapidly.

The expert predicts it will 'almost inevitably' stay at that level for the rest of this year and into 2010.

Davis states the recession 'could lead to deflationary pressures in the system and that's the real fear'.

He adds that if deflation occurs then it will present a 'real, major risk' to the country and it should be avoided 'at all costs'.

The CEBR is predicting the rate will fall to zero, but says a lowest figure of 0.5 per cent or 0.25 per cent rate is also possible.

Earlier this month, the Bank of England's monetary policy committee reduced interest rates by 0.5 percentage points to 1.5 per cent.

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