A SLOWING world economy will force the Bank of England to keep interest rates on hold until the middle of next year, a report has said.
The Centre for Economics and Business Research (Cebr) said it expects rates to remain at their historic 0.5 per cent lows until next summer before a hike by the Bank's Monetary Policy Committee.
Previously the forecaster had said the Bank would raise rates in February, but plunging markets in China that have sent shockwaves around the world have caused it to push back this date.
The Cebr expects the UK economy to grow by 2.5 per cent this year, but sees this slowing to two per cent in 2016 and then averaging just 1.7 per cent over the years 2017 to 2020.
By contrast, independent Government watchdog the Office for Budget Responsibility expects the UK economy to grow at 2.4 per cent this year, and remain above two per cent over the following period.
The new report said: "The global economic slowdown, driven by substantial weakness in emerging markets - most notably China - is holding back export prospects and curbing business investment."
It added: "If the world economy continues to falter, then these weights on growth will become even bigger."
The forecasting group said the consumer price index measure of inflation is expected to stand below two per cent until 2017, giving the Bank room for manoeuvre to keep rates on hold.
A number of economists have expressed concerns about the sustainability of the UK's recovery because it is driven by consumer spending, rather than selling goods and services abroad.
The Cebr said: "Household spending, not trade or investment, will account for the clear majority of the growth seen over the next five years.
"Net trade will act as a drag on growth over this timeframe as the UK continues to import far more than it exports."
The body said the UK's current account deficit - a measure of the country's trading position with the rest of the world - is expected to average "an enormous" £77 billion per annum over the period 2015-2020.
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