Capital Economics has followed Bank of England deputy governor Jon Cunliffe in pouring cold water on the prospect of a first base rate rise in 2019.
Capital Economics has followed Bank of England deputy governor Jon Cunliffe in pouring cold water on the prospect of a first base rate rise in 2019.
Capital Economics predicted a first rate rise in November 2016 and inflation reaching 1% by the fourth quarter.
The Capital Economics report, edited by Roger Bootle and Jonathan Loynes, said: “We think the recent falls in interest rate expectations aren’t justified. We anticipate that bank rate will rise in November 2016.
“However, with inflation set to take a long time to get back to target after the pick-up this year, we believe the path of future rate hikes will only be gradual. Bank rate should only reach 1.25% by the end of 2017.”
The report added: “We think that the global growth worries have been an overreaction. In fact, we forecast that global growth will be higher in 2016 than it was in 2015.”
Yesterday Bank of England deputy governor Jon Cunliffe scorned suggestions that base rates could stay at 0.50% until 2019 or be cut rather than raised.
He said: “I can’t see anything in the economic news over the last three-to-four weeks that would lead to a shift like that.
“My big picture of the world hasn’t changed with market [expectations]. I think we are, particularly in the last couple of years, in the slow healing process from a financial bust.”
