‘Low rates are here to stay’ says economist Bootle

INTEREST rates will stay low for the duration of this Parliament as inflationary pressures fall back after the VAT hike next year, a leading economist told business leaders last night.

Roger Bootle, director of Capital Economics and adviser to Big Four accountant Deloitte told an audience at the firm’s Manchester office that he expects house prices to weaken further.

From a regional point of view he said the North West would fare better than some other regions because of the strength of its manufacturing sector, which he believes will enjoy reasonable growth in exports.

Domestic demand he said would come under pressure in the coming months as public sector cuts bite.

“Although there’s not much I would have done differently to the Coalition, there’s a serious danger of a double-dip. Consumer demand will come under pressure.

“I think the notion that the private sector is going to move into the space vacated by the public sector is a fairy tale. In terms of the public sector, if you cut jobs you cut demand – even diversity awareness coordinators go shopping.

“I think regions heavily exposed to the public sector will have a hard time, and the North West is certainly better placed than some regions such as the North East, in this regard.

Mr Bootle said UK exports had not grown as much as hoped due to continuing problems in the Eurozone economies – the biggest market.

He said he would not be surprised to see Greece default on its deficit payments and also quit the currency such is the parlous state of its finances. Uncertainty over this, and the health of other economies such as Portugal, Ireland, Spain, would continue to hinder recovery in Europe, he added.

China, he said would continue to grow fast – at a rate of 10% – if it can placate an increasingly tetchy America – and avoid a trade war.

If China persists with its current stance with regard to the level of its currency, he said there was a real chance of the US adopting protectionist policies, which would have a “catastrophic” impact on China.