Boulger predicts “new normal”

He also believes that consumer price inflation could fall below 1% throughout 2015 primarily due to falling oil prices, which are now at their lowest level since May 2009.

He said: “Maybe we are moving into a long-term low interest rate environment.

“Subject to the oil price not bouncing back I think one could expect the new normal being less than 3% and it taking longer than 2017-18 to get there.

“At least until the early part of the next decade we will remain in a very low interest rate environment and the bank rate will stay at 0.5% for the next year.”

The Bank of England has previously signalled that interest rates will hit a new normal of 3% by 2018.

Boulger added: “One of the problems with a lot of market commentators and participants is they weren’t around before the mid-1960s

“They have never really lived through a period where interest rates are relatively stable and relatively low – they are used to rates being high and relatively volatile.

“If you look at Japan they have had low rates for 25 years.”

On inflation Boulger added: “Probably next month’s figures will be below 1% and one can see the CPI figure remaining below 1% for all of next year.”

Paul Broadhead, head of mortgage policy at the Building Societies Association agreed that the Bank of England will be cautious when it comes to raising interest rates.

He said: “We’re not going to see big jumps in interest rates over the next few years because of the vulnerability of the economy.

“If people are using up most of their income to cover mortgage loans that is going to have an impact on the economy as they will have less money to spend.”

Commenting on plans for four joint meetings between the Monetary Policy Committee and the Financial Policy Committee in 2016, he added: “They recognise importance to financial stability and monetary policy.

“The fact that they have got clear agendas but want to have joint meetings shows they recognise that the impact of rate rises must be understood.

“This suggests a lower base rate period.”