Sterling's rate 'depends on the eurozone'

The future interest rate will depend on what happens in the eurozone, an economist has suggested.

Over the next six months, the British rate of interest will decrease to around 0.5 per cent, predicted economist at Defaqto Michael Baxter.

However, the pound will be in trouble unless the rate of the euro falls further than that of the sterling.

Mr Baxter added that the vulnerability of the country's currency could pose a threat to the economy.

"I think there might be a bit of a shock coming when we discover how expensive imported products are," he said.

As the eurozone has to suffer particularly badly for the pound to improve, it was not necessarily good news for the global economy, Mr Baxter concluded.

According to foreign exchange specialists HiFX, the year ahead is set to be "gloomy" for the sterling.

The company said that foreign exchange traders believe that the UK's dependency on the housing and financial markets will make the recession hit the country harder and for longer.