Bank warns of zero growth until 2025 as rates held

London: The UK economy is likely to see zero growth until 2025, while interest rates remain high for longer, the Bank of England has warned.

It came as the Bank left rates on hold for the second time in a row at 5.25%, their highest level in 15 years.

Rishi Sunak has pledged to get the UK growing by the end of the year, but the lower forecasts put this in doubt.

However, the bank expects inflation – the pace at which prices rise – to fall sharply in the coming months.

This means the prime minister is on track to meet his promise to halve inflation to around 5% by the end of the year.

Up until September, the Bank of England had raised rates 14 times in a row to tame soaring inflation which has been squeezing households.

It has led to increases in mortgage payments, squeezing borrowers, but also higher savings rates.

Despite the gloomy economic forecasts, Bank of England boss Andrew Bailey said it was “much too early to be thinking about rate cuts”.

“We will keep interest rates high enough for long enough to make sure we get inflation all the way back to the 2% target,” he said.

And Mr Bailey said: “We’ll be watching closely to see if further rate increases are needed.”

The most recent inflation figure was 6.7% in the year to September, but the Bank expects it to continue to fall as energy and food price rises ease and expects it to remain at around 3% throughout next year, above the Bank’s target.

While the Bank is not predicting a recession, it expects zero growth from now, across the whole of next year – when there is likely to be a general election – and into 2025.

“UK economic growth is slowing,” the Bank said.

Chancellor Jeremy Hunt promised there would be measures to get Britain growing again when he unveils the government’s plans to try and boost the economy in its Autumn Statement later this month.

“The Autumn Statement will set out how we will boost economic growth by unlocking private investment, getting more Brits back to work, and delivering a more productive British state.”

But Labour said 13 years of “economic failure” had “left working people worse off”, while the Liberal Democrats called the interest rates decision a “cold comfort for the millions of hard working families”.