UK interest rates will stay at current 0.5% levels until 2011 and will only climb to 2% by around 2014, according to the Centre for Economics and Business Research (CEBR).
Tax rises and spending cuts will continue over the next four years, said the CEBR, with a further weakening of the pound, falling to $1.40 and "possibly" below 1 euro, reports the BBC.
The forecast factors in the government slashing the UK budget deficit by £100bn over the next parliament.
About £80bn of this would come from spending cuts, said the CEBR, with an additional £20bn from tax rises.
Economic growth would be severely limited by such public finance cuts, forcing the Bank of England to keep rates low to encourage borrowing, the CEBR has said..
"We are likely to see an exciting policy mix, with the fiscal policy lever pulled right back while the monetary lever is fast forward," said Douglas McWilliams, CEBR chief executive and one of the report's authors. Full story...
THE FSA has actively warned off up to 10 European banks from opening London branches over concerns they are too unstable, reports the Telegraph.
Under EU law the regulator is forbidden from stopping European banks establishing branches in the City.
But, following the Icelandic banking crisis and the resulting £7.5bn compensation payout to savers, it is trying to protect British consumers from banks which still look vulnerable, according to senior sources at the FSA.
London branches of European banks are regulated by their home authority - the FSA has jurisdiction over them - but the Icelandic financial meltdown prompted the regulator to find ways around rules on its power over European banks.
Earlier this month, Lord Turner, the FSA's chairman demanded tighter cross-border banking regulation, headed up by national regulators, to give host countries more control over overseas banks. Full story...
EUROPE'S biggest insurers have united in an effort to avoid becoming sucked into what they fear could be a hugely damaging backlash from regulators, reports the Independent.
With the banking bonus scandal looking set to flare up again as US investment banks prepare to report bumper profits, insurers are keen to differentiate themselves from other financial institutions.
Meetings have taken place across Europe to galvanize efforts to protect insurers from getting caught in the crackdown currently in the process of being imposed on banks.
Leading figures in the effort include Henri de Castries, chief executive of AXA, France's biggest insurer; Andrew Moss, who runs Britain's Aviva, and Alex Wynaendts, the chief executive of the Dutch insurance group Aegon.
They have privately agreed to co-ordinate efforts with both domestic and Europe-wide regulators. Full story...
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