CEBR: Interest rates could fall to zero

Interest rates could fall to zero and remain there through until 2010, it has been suggested.

These are the views of senior economist at the Centre for Economics and Business Research (CEBR) Charles Davis. He stated it is likely for rates to fall further and remain low because the country is now officially in recession.

The economic climate could "lead to deflationary pressures in the system" and should this happen it could pose a huge risk to the country, explained Mr Davis.

Cutting rates is one way to try and combat the problem - but it might not be enough, he continued.

"The monetary transmission mechanism is not working as it normally does due to problems in the banking sector."

On January 8th 2009, the Bank of England Monetary Policy Committee dropped interest rates to 1.5 per cent. It is now at its lowest level since the bank formed in 1694.

Brits may also be aware the current foreign exchange rates means sterling is weak against the dollar and euro.