Andrew Lilico, chief economist at the influential Policy Exchange think tank, has warned of an interest rate environment not seen since the 1990s.
He said the rise could happen as the recovery beds in and Government measures to stave off a recession lead to an explosion in the money supply.
Mr Lilico also warned of a return to "boom and bust", as ballooning inflation threatens to tip the economy back in to recession in 2013 or 2014.
"Given the constraints of late 2008 and the absurdities of subsequent fiscal, finance and regulatory policy, if we can get away with a recession of only 6.6pc, deflation of only 2pc and inflation of only 10pc for one year, [Bank of England Governor] Mervyn King will deserve a medal," Mr Lilico said.
A brief double dip recession early next year is likely, he said, but it "would be quite compatible with a boom thereafter".
More doom here: Interest rates 'may hit 8pc' in two years - Telegraph
He said the rise could happen as the recovery beds in and Government measures to stave off a recession lead to an explosion in the money supply.
Mr Lilico also warned of a return to "boom and bust", as ballooning inflation threatens to tip the economy back in to recession in 2013 or 2014.
"Given the constraints of late 2008 and the absurdities of subsequent fiscal, finance and regulatory policy, if we can get away with a recession of only 6.6pc, deflation of only 2pc and inflation of only 10pc for one year, [Bank of England Governor] Mervyn King will deserve a medal," Mr Lilico said.
A brief double dip recession early next year is likely, he said, but it "would be quite compatible with a boom thereafter".
More doom here: Interest rates 'may hit 8pc' in two years - Telegraph
Comment