Interest rates and prices up in 2011, says CBI

The British economy will slow to a virtual standstill in 2011, while inflation will be pushed higher by energy prices, according to CBI predictions released today. Inflation will in turn force the Bank of England to raise the base rate as soon as the second quarter of next year.
 
The CBI downgraded its quarterly growth forecast for the first three months of 2011 to 0.2 per cent from 0.3 per cent. It expects the sluggish performance to continue well into 2012, when it expects a slower rate of growth than is normal for an economy pulling out of recession.
 
Ian McCafferty, chief economic adviser at the CBI, said: "What is striking is how little we see growth accelerating in 2012. Typically, by the third year of a recovery, growth would be more robust than we expect for either 2011 or 2012.
 
"Real take-home pay will be hit further next year; unemployment is not expected to fall very quickly in 2012, and households will most likely face higher mortgage interest rates.”
 
Despite the grim scenario, the CBI doesn't think the UK will slip into a double-dip recession.

Read a full report at the Guardian. ·