Economists say rate hike will wait until 2016
POLICYMAKERS are widely expected to keep interest rates at record lows until 2016, as details of the last meeting of rate-setters revealed they voted unanimously against a rate hike.
The Bank of England’s nine-strong monetary policy committee made the decision to keep rates at 0.5 per cent at the beginning of the month, but the vote breakdown was only revealed by the Bank yesterday. For two voters the decision between hiking and holding was described as “finely balanced”.
“We wouldn’t be surprised if those two, presumably Ian McCafferty and Martin Weale, start voting for a rate rise before the end of the year,” said Vicky Redwood from Capital Economic yesterday. Nonetheless, Redwood believes they will be on their own for the rest of the year, anticipating the first hike to come in mid-2016.
“Even though the decision ‘remained finely balanced’ for two members, this would not change our view that the bank rate is unlikely to see a rise until the first three months of 2016 at the earliest,” said Martin Beck, senior economic advisor to the EY Item Club.
“We have put back our expectation of the Bank of England lifting interest rates from 0.50 per cent to 0.75 per cent from February to May 2016,” said economist Howard Archer from analysts IHS.
•Carney said yesterday he was “very pleased” at news of Ian McCafferty’s reappointment to the Bank’s monetary policy committee. He offered his “sincerest thanks” to David Miles, who is leaving it, saying “his knowledge and experience have played no small part in supporting the recovery we see today”.