In their National Institute Economic Review published today, NIESR said that they 'expect interest rates to begin to rise gradually from the middle of 2015'.
NIESR forecasts interest rates will rise from the current level of 0.5 per cent to 1 per cent by the end of 2015 before rising gradually to to 2.75 per cent by the end of 2019.
The report said:
"On balance, we think the risk of waiting a few more months to start raising interest rates outweighs the risk from a premature tightening. We have revised our view of the initial increase in interest rates from February to June 2015."
The report also states that ongoing troubles in the eurozone remain the biggest threat to UK growth forecasts, which it expects to peak at 3 per cent this year before slowing to 2.5 per cent in 2015 and 2 per cent in 2016.
NIESR principal research fellow Simon Kirby says:
“Continued stagnation or even worse in the euro area compared to our baseline projection would knock the growth forecast quite significantly. Certainly a resurgence of 2010-2012 could really have a negative impact on the UK economy.”
