Interest rates not expected to rise despite upturn

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Fewer British households expect the Bank of England (BoE) to raise interest rates over the next year than a month ago, despite signs of strengthening economic growth, a survey by financial data company Markit shows.

The BoE is usually expected to raise interest rates at times of economic growth to make borrowing money more expensive, thereby keeping inflation in check.

The proportion of households expecting a rate rise within 12 months sank from 46 per cent in March to 41 per cent in April – the lowest proportion since January.

The share of households who said they did not know when the BoE would raise rates rose from 23 per cent to 29 per cent.

The survey was conducted from April 11-14 – before the Office for National Statistics published data last week showing a big drop in the unemployment rate to 6.9 per cent, which prompted financial markets to bring forward 
expectations of a rate rise to March 2015.

The BoE has said repeatedly that it is in no hurry to raise rates and wants to see the slack in Britain’s economy largely used up first.

Chris Williamson, economist at Markit, said: “The lower interest rate expectations can be seen as a sign that forward guidance is working successfully.

“However, the fact that inflation also continues to fall... will have no doubt also contributed to the lowering of rate hike views.”