BOE To Wait After UK Elections to Raise Rates

The Bank of England will wait until after the general election to raise interest rates as the threat of a resurgent eurozone crisis hangs over the UK economy, according to a leading thinktank.

The National Institute of Economic and Social Research (NIESR) pushed back its expectation of the first rate rise to June 2015, a month after the nation votes, but said it could be even later. Previously it was expecting the first hike in February.

NIESR said rates, currently at an all-time low of 0.5%, would reach 1% by the end of 2015, rising gradually to 2.75% by the end of 2019. The Bank is expected to look through low annual inflation, currently at 1.2%.

Growth in the UK is expected to peak this year at 3% – unchanged from NIESR’s August forecast – before slowing to 2.5% in 2015, and 2% in 2016 as the slowest recovery in a century continues. Growth has become better balanced, it said, with business investment providing a bigger contribution.

A flagging eurozone economy and a return to the depths of the region’s crisis is the single biggest threat to the forecasts, NIESR warned.

Simon Kirby, principal research fellow at the thinktank, said: “Continued stagnation or even worse in the euro area compared to our baseline projection would knock the growth forecast quite significantly. Certainly a resurgence of 2010-2012 could really have a negative impact on the UK economy.”

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 has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. 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