The Bank of England is expected to leave borrowing costs on hold for the rest of the year after keeping interest rates at their record low of 0.5 per cent.
Rates have been frozen for six years, with the recent slide in inflation to zero pushing back forecasts for the timing of a hike.
Howard Archer, chief UK economist at IHS Global Insight, said: “We retain the view that the Bank’s next move will be to raise interest rates to 0.75 per cent around February 2016.”
Greater insight into the Bank’s thinking will emerge tomorrow with its quarterly inflation report, which will be accompanied by a second letter from governor Mark Carney to the Chancellor explaining why inflation is more than 1 per cent below its target.
James Hughes, chief market analyst at eToro, said: “The markets and the government will be interested in hearing just when the governor thinks inflation will return to around the 2 per cent benchmark. However, even if this is not in the near term, there still seems no argument to move rates in either direction.”
The Bank has said it expects consumer prices inflation, which has been under pressure amid the sliding cost of oil and the supermarket price war, to turn negative “at some point in the coming months”.
Chief economist Andy Haldane recently floated the likelihood of a rates cut to try to stave off a damaging spiral of falling prices, but he seems to be a lone voice among policymakers.
Carney has played down the possibility of having to resort to lower rates if deflation persists.