Rates rock bottom for rest of year

INTEREST rates look set to stay at rock bottom for the rest of the year after a sharp slowdown in economic growth in recent months, by Hugo Duncan.

Gross domestic product – the total size of the economy – increased by just 0.3pc in the first quarter of 2015, according to the Office for National Statistics.

That was half the 0.6pc growth rate seen in the previous quarter and the worst performance since late 2012 – raising fears that the recovery is running out of steam.

The disappointing figures fuelled speculation that interest rates will not rise until next year at the earliest having been frozen at 0.5pc since March 2009.

Jake Trask, a dealer at currency firm UK Forex, said: ‘Although the recent economic data from the UK has been far better than most western economies, this release will surely see the slim chance of a 2015 UK interest rate rise disappear.’

Howard Archer, chief UK economist at HIS Global Insight, said: ‘It currently looks probable that the Bank of England will hold off from raising interest rates until 2016.’

The ONS report showed output in the services sector rose 0.5pc in the first quarter while construction was down 1.6pc and industrial production was down 0.1pc despite a 0.1pc rise in factory output.

The economy, which crashed 6pc under Labour during the Great Recession of 2008-09, is now 4pc bigger than it was before the crisis struck.