Increase in interest rate ‘sooner rather than later’

AN INTEREST rate rise to 0.75 per cent in the first half of next year looks “much more likely than not,” analysts have predicted, after a member of the Bank of England’s monetary policy committee (MPC) said she expects a rise to take place before long.

Kristin Forbes joined the MPC in July last year
Kristin Forbes joined the MPC in July last year

Kristin Forbes, who joined the MPC in July last year, said in a speech yesterday to business leaders in Brighton that “despite the ‘doom and gloom’ sentiment, the news on the international economy has not caused me to adjust my prior expectations that the next move in UK interest rates will be up and that it will occur sooner rather than later”.

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She said the UK’s direct exposure to emerging markets in slowdown such as China is “limited” and “appears manageable”.

IHS Global Insight analyst Howard Archer said his team believes that although the central bank is most likely to decide in May, “we certainly would not rule out a move in the first quarter”. He added: “This is based on our belief that the UK will see some improvement in growth from its third-quarter soft patch and that consumer price inflation will start rising gradually from late 2015. We also expect earnings growth to strengthen further, although this will likely be partly offset by a further pick-up in productivity.”