Interest rate predictions: When will the base rate rise? Working out when this key interest rate will rise again is the holy grail of financial forecasting. But the "experts" have been pretty consistent in getting it wrong. When the Bank Rate was cut to 0.5pc in 2009 in an attempt to fight a financial crisis that threatened deflation, the vast majority of economists predicted that rates would rise within a year, woefully underestimating the problems. And they refused to change their minds, fixated on history that suggested rates quickly return to "normal." In June 2010, the collective view of economists in a monthly poll by Reuters was for the Bank Rate to accelerate to 2pc by the end of 2011. By late 2011, with rates still at 0.5pc, these professionals were still predicting a rise by the end of 2012. Of course, many will argue that rates should have risen long ago. The job of the Bank's Monetary Policy Committee (MPC) is to regulate the temperature of the economy. But its specific task is to control inflation. Looking two years ahead, the consumer prices index (CPI) should be kept between 1pc and 2pc. The MPC has failed miserably in this aim. CPI has been above this target for the past 47 months and prices have risen by 21pc since 2007. Blackouts during the early Seventies energy crisis, which sent rates soaring Britain's above-target inflation is fairly rare among the world's richest nations. Inflation in both America and Germany is at just 1.2pc, while in the eurozone, dragged down by the woes of Spain and Greece, it is just 0.7pc. Interest rates there are falling, cut from 0.5pc to 0.25pc last week. Price pressure is easing in nearly all parts of the developed world, with the exception of Japan - a country that holds a worrying portent for Britain's financial future. In Japan, inflation is at 1pc, a giddy new high. The country has faced a two-decade battle with deflation. In the Eighties, a peak in its working-age population drove the economy and the price of assets such as property and shares to extraordinary highs. It ended in a banking crisis in 1989 and 1990 and a collapse in the value of those assets. Policymakers in Western Europe and the US have nervously followed this slow-motion meltdown. Populations in the West, after all, mostly follow the same ageing pattern of Japan, but with a 20-year lag. One argument is that as more of our "baby boomers" move from being economically active to taking a well-earned rest in retirement and spending less, our economic growth will stagnate here in the same way and deflation, which was briefly a threat in 2009, could emerge as the greater danger. The opposing view is that the effects of the measures deployed today could create runaway inflation - which would need panicked rises in rates to control it. As with Japan before it, Britain has borrowed far too much and inflation helps erode away those debts. That is why so many fear that the Bank of England and the Government are comfortable with allowing a higher inflation rate. How interest rates predictions have changed in 2013 (click here for a full explanation of the chart) So when will rates rise? And what does history tell us? A Bank Rate rise is possible next year, say some economists. But the Bank's latest projection puts only 40pc probability on unemployment dropping to 7pc by the end of 2014 - and a 70pc chance by the end of 2016. The markets are sticking with a forecast of a rise in 2015. Tom Stevenson, a director at investment firm Fidelity, said it was unwise for investors to try to make precise predictions, but he believes that rates will stay lower for longer than the market suggests, and that even when they do start rising, will do so slowly. He added: "Don't forget rates were at 2pc for 20 years from the Thirties to Fifties. Inflating away a debt problem takes years. That makes it a good time for shares. "This is potentially a Goldilocks scenario for UK equity investors - not too hot, not too cold - decent growth and interest rates at emergency low levels," Mr Stevenson said. But when it comes to your finances it never pays to be complacent, and history should be acknowledged. Rates have risen rapidly and with little warning several times in the past, most notably during the energy crisis in the Seventies, which caused a spike in inflation so big that rates had to rise from 5pc to 13pc in 18 months. Rates were raised in preparation for the ERM but Britian's attempts to join eventually failed in 1992 Towards the end of that decade, an even bigger shock was delivered by a rise from 6.5pc to 17pc in just 15 months. Most readers will also remember the surge in rates to nearly 15pc in 1989 amid Britain's disastrous attempts to ready itself for entry to the European Exchange Rate Mechanism. As the chart shows, monetary policy control has been less volatile since it was passed from the Chancellor of the Exchequer to the Bank of England in 1997. If you plan to gamble that low rates will stay low, be aware of the early warning signs. Wages are rising at a pathetic annual rate of 0.7pc, official figures show. If this were to suddenly pick up, better buying power would push up shop prices - which would make workers ask for more. This is the much-feared inflationary spiral. History suggests that the canary in the coal mine is salaries in industry. Sadly, decent wages are a distant memory for most workers. Vocalink, which provides the payment mechanism for most wages in Britain, says pay in manufacturing is falling at the rate of 0.7pc a year. If you're ready to make your own call on rates, read our Action Points below to understand how to profit with your portfolio. We will also publish a guide to what this all means for mortgage rates and savings rates in tomorrow's Daily Telegraph and here at telegraph.co.uk/money. Jeremy Warner: Expect a long wait for 'normal' rates Action points: How to profit by making your own call on low rates The City's best-paid minds have consistently called rates wrong, while shrewd investors shy from even attempting to. When asked to offer a forecast this week, Edward Bonham Carter, chief executive of fund manager Jupiter, said: "We all want to know what's going to happen next, but it's a dangerous thing to believe you know the future." With those words ringing in your ears, it is still worth remembering that those who do get ahead of events can profit. For example, the market believes rates will rise in 2015, and that expectation will be priced in. So bonds, which lose their appeal when rates are higher, have been falling in value. If rates don't rise as quickly as expected, bond prices should rise. Recent history gives us a rough guide to assets that flourish when rates are low - namely, shares, property and bonds. But within that, are many nuances. Stick with bonds? Investors in bonds were one of the winners of the financial crisis. That is because the fixed interest paid on these investments, which are effectively loans from investors to companies or governments, become more attractive when interest rates everywhere else fall, so investors buy. It also helped that the Bank of England was printing money to buy an awful lot of gilts, or British government bonds. The uncertainty that stalked markets also made the certainty of fixed payments more enticing. As the economy has improved and forecasts of rate rises have been brought forward, bond prices have fallen in recent months - so income yields have risen. Jason Hollands of wealth manager Bestinvest believes that the correction may have gone too far. "We are approaching a point when cautious income seekers might start returning to the core bond markets again," he said. But investors should be aware of the theoretical damage that could be inflicted when rates do rise. Research by JP Morgan Asset Management suggests that a 1pc rise in interest rates has historically pushed down government bond prices by 16pc. It is that fear that has been pulling down prices. The impact on high-yield bonds, it should be noted, is far less pronounced. One way to play this is to hold a "strategic" bond fund, where the manager can tread through the minefield for investors. Kames Strategic Bond and M & G Optimal Income are popular with advisers. Consider buy-to-let Residential property has proved a honeypot for investors in the world of low rates. With savers getting less than 2pc from the bank and gross yields of around 6pc or 7pc available on buy-to-let homes, it is easy to see the attraction. Government policy remains committed to pumping up prices, by keeping mortgage rates artificially low and by aiding the market with Help to Buy. These policies, property group Knight Frank said this week, would add 7pc to prices next year and 5pc in 2015. Of course, when rates do finally rise, it may send values tumbling. Don't bet the house. Stay invested in shares, buy small caps History suggests that when rates rise slowly from low levels, returns on shares have been "generally OK," according to analysis by JP Morgan. Kerry Craig, a global strategist at the company, said: "Slowly rising rates are a sign of improving economic recovery." But he warned investors to avoid "bond proxy" defensive stocks. However, if rates stay low it will be these high-income stocks that remain in demand and income hunters may extend their search outside the FTSE 100 and into smaller companies. Frequently tipped funds include Miton's UK Multi Cap Income and Standard Life Investments" UK Smaller Companies trust.