Forecast predicts slower growth

A forecasting group said yesterday there was enough slack in the British economy to allow the Bank of England to keep interest rates at 4.5%.

The Ernst & Young Item Club’s summer forecast contained lower estimates for growth in the next two years, as rising oil and commodity prices and overseas interest rates acted as a brake.

It also pointed out that heavy spending in recent years by the consumer sector and the government meant these sectors were no longer able to drive the economy forward.