When will interest rates rise? Economists expect hold until mid-2016

 
Will Bentley
Rates could stay low until next year (Source: Getty)

Bank of England is not expected to raise interest rates until the middle of 2016, according to new forecasts from the Centre for Economics and Business Research (CEBR).

It had previously expected a rise to come as soon as February. The think tank has blamed the push back on concerns over the global economy, and highlights China’s slowdown as holding back exports and business investment.

Scott Corfe, head of macro­economics at the CEBR, said: “It’s clear that the global economy has deteriorated significantly over the past few months and there are significant downside risks to the UK’s own prospects.

“With inflation expected to re­main below the Bank of England’s central target of two per cent until 2017, we think the Bank Rate will remain on hold until the middle of next year. A rate rise in May or August seems most likely, to coincide with the Inflation Reports released in these months,” he added.

UK interest rates have been held at 0.5 per cent since early 2009. The CEBR is also predicting that household spending will account for the majority of the growth seen over the next five years.

It says net trade will act as a drag on growth over this timeframe as the UK continues to import far more than it exports.

It forecasts economic growth to decelerate to two per cent in 2016, from 2.5 this year, and then average just 1.7 per cent between 2017-2020.

However, the Office for Budget Responsibility expects growth to stay above two per cent until 2020.

In the US, the Federal Reserve cited similar concerns over global economic health for not raising its interest rates at its September meeting, holding them at 0.25 per cent.

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