Economists have put back their predictions on a first base rate hike after the Monetary Policy Committee unanimously voted to hold the base rate today.
Economists have put back their predictions on a first base rate hike after the Monetary Policy Committee unanimously voted to hold the base rate today.
Pantheon Macroeconomics chief UK economist Samuel Tombs predicted a rise in the third quarter of 2016 and Capital Economics UK economist Ruth Miller opted for the fourth quarter.
Tombs, who was still expecting a Q2 increase as of last month, said: “The committee still looks primed to move quickly to raise rates in the second half of this year, provided the U.K. votes to remain in the E.U.
“The MPC believes that the remaining slack in the economy will have been eliminated by the end of this year, and will want to start raising rates from their emergency low levels before that point is reached.
“Indeed, with the labour market continuing to tighten, core inflation now on a strengthening trend and productivity growth still weak, we still think that the committee could raise interest rates in Q3.”
Miller, whose firm Capital Economics predicted a rate hike in May last month, said: “Given that the MPC has not sent any signals that it is even thinking about preparing the ground for a rate rise, and a June EU referendum now looks likely, the chance of a rate hike in the first half of this year looks slim.
“Nonetheless, we still think that markets have gone too far in not expecting a rate rise until 2018. We still think that a rate rise this year is likely, and now expect the MPC to hike Bank Rate in November 2016. “
