Global Anxiety To Force BOE to Hold Rates Until 2020

Anxiety in global markets and a weakening US economy will force the Bank of England to delay UK interest rate rises until at least 2020, according to a leading firm of analysts.

The Economist Intelligence Unit (EIU) forecast, which will cheer mortgage borrowers and disappoint savers, extends by at least three years the timeline for the central bank’s first increase from the historically low 0.5%.

Most analysts have forecast a first rise in the base rate for almost seven years towards the end of this year or early 2017.

The Bank of England governor, Mark Carney, said last month that the UK faced “a powerful set of forces” that prevented policymakers from raising rates.

However, Carney used his quarterly inflation report briefing to say that interest rates were “more likely than not” to go up over the next two years.

Danielle Haralambous and Aengus Collins, analysts at the EIU, said Carney’s statement was at odds with the downbeat analysis in the inflation report.

“We now expect record-low interest rates to remain in place in the UK for at least the next four years,” they said.

In the last week the Bank has downgraded the UK’s expected GDP growth in 2016 and signalled that inflation will remain low this year and in 2017.

Trade data shows that Britain has struggled to improve its exports against the headwinds of a stronger currency and nervous global markets, especially among emerging economies.

via The Guardian

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza