Many economists do not expect UK interest rates to rise until 2019 despite inflation remaining above target, according to a BBC snapshot. They believe that the Bank of England’s Monetary Policy Committee (MPC) will be reluctant to raise rates during Brexit negotiations.

Inflation stood at 2.6% in July – well above the Bank’s official target of 2%.

Half the economists contacted by the BBC think wages growth will outpace inflation in the first half of 2019. Last week, one MPC member, Michael Saunders, said a “modest rise” in rates was needed to curb high inflation. The base rate has stood at a record low of 0.25% since August 2016 – the first move since March 2009, when it was reduced to 0.5%. In June, three MPC members voted for a rate rise – the first time since May 2011 that so many had wanted to tighten policy.

The same month the Bank’s chief economist, Andy Haldane, also made a call for a rate rise this year. However, Mark Carney, the Bank governor, said in his Mansion House speech in late June that “now is not yet the time” to start raising rates once more.

Stuart Green, of Santander Global Corporate Banking, told the BBC he did not expect a rate hike to happen before 2019.

We believe that policymakers will be reluctant to tighten monetary policy until greater clarity emerges around the UK’s post-EU trading framework, and our expectation of declining inflation through 2018 should also reduce the pressure for an interest rate rise,” he said.

Others expect it to be even longer, with economists at Morgan Stanley not expecting any movement until March 2019 at the earliest, with Andrew Goodwin at Oxford Economics suggesting it would not happen until the third quarter of that year. Similarly, Fabrice Montagne, at Barclays, expects rates to stay on hold until “at least 2019”.

But there are those who argue that the Bank will raise rates sooner. Howard Archer, chief economic adviser at the EY ITEM Club, said he had one increase, to 0.5%, pencilled in for late 2018, adding: “I would not be at all surprised if it was delayed until 2019.”

Michael Lee, at Cambridge Econometrics, expects a rise to come in either the second or third quarter of next year as he thinks inflation will stay above the Bank’s 2% target for the next two to three years. Philip Rush, at Heteronomica, is more specific, settling on May 2018. The one outlier is George Buckley, at Nomura, who expects the MPC to jump in November.

Source: BBC News (published 04 September 2017)