UK interest rates to stay at record low but another hawk could appear

The UK’s rate-setters are widely expected to hold fire on interest rates when they meet this Thursday, but the door is open for at least one more member of the nine-strong committee to dissent than last time around.

 

Last month saw the Bank of England’s monetary policy committee vote eight to one to hold rates at their record low of 0.5 per cent. Despite the economy growing strongly, inflation has been dragged down this year due to a combination of low oil prices, cheap commodities, and a strong pound, which weighs on the price of imported goods.

 

But two members are believed to be on the brink of joining solitary dissenter Ian McCafferty.

 

“We suspect Kristin Forbes is one such member having said that interest rates will need to rise in the not too distant future to ensure inflation does not overshoot the two per cent target,” said economist Victoria Clarke from Investec. Clarke flagged up Martin Weale as another potential dissenter. 

 

Markets currently expect the first interest rate hike to come during the summer of 2016.