UK interest rates will stay low for years amid tax rises and spending cuts, according to an economic forecast. The Centre for Economics and Business Research (CEBR) believes the rate will remain at its current 0.5% level until 2011 and not reach 2% until 2014.

The report predicted the pound will weaken further, falling to $1.40 and “possibly” below 1 euro.

Its forecast is based on the government managing to slash the UK budget deficit by £100bn over the next parliament.

It says that about £80bn of this would come from spending cuts, and a further £20bn from tax rises.