U.K. Rates Seen Rising in Early 2016 as BOE Shrugs Off Turmoil

Investors should brace themselves for an interest-rate increase in early 2016 as the Bank of England shrugs off recent financial-market turmoil, according to economists.

More than two-thirds of respondents to Bloomberg’s monthly survey said the weakening prospects for China’s economy aren’t enough to deter officials from removing the emergency stimulus that’s been in place since 2009. That chimes with the policy makers’ view that it would be premature to adjust their outlook when the U.K.’s expansion remains on track.

While the BOE kept its key rate at a record-low 0.5 percent last week, Ian McCafferty voted for an increase. Kristin Forbes said Friday rates may have to increase “sooner rather than later” and Martin Weale wrote in The Scotsman newspaper that they will need to rise “relatively soon” because inflation will probably be above the 2 percent target in two to three years’ time. Economists forecast a 25 basis-point increase in benchmark borrowing costs in the first quarter. Still, markets aren’t so sure, with futures contracts only fully pricing in an increase by the second half of the year.

Bloomberg

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.