British interest rates will rise from record lows early next year as the UK economic recovery outpaces Europe’s and inflation picks up, a Reuters poll of economists forecasts on Wednesday.
Although Bank of England Governor Mark Carney recently said a hike is getting nearer, only six of 60 economists polled this week expect it to happen this year, 48 forecast it in the first quarter of next year. Six see it coming later. Recent strength in the British economy comes at the same time as a fall in inflation, which slowed to 1.5 percent in August — stubbornly below the Bank’s 2 percent target, but is expected to pick up in the coming months. GBCPI
In the euro zone, Britain’s biggest trading partner, inflation is at a five-year low of just 0.3 percent and the bloc’s economy stagnated in the second quarter. Dwindling demand from the euro zone has hurt British factories, with the latest data showing UK manufacturing grew at the slowest rate in 17 months in September.