Fed move could delay rate rise in the UK

The Bank of England is still expected to raise interest rates in early 2016 but that prediction now rests on a knife-edge after the US Federal Reserve delayed its first hike, a Reuters poll of economists found.
By The Newsroom
Published 28th Sep 2015, 18:44 BST

Median expectations in the survey of over 60 analysts show the BoE increasing the Bank Rate to 0.75 per cent in the first quarter of 2016 from the current record low of 0.50 per cent.

But that consensus is far from solid. Twenty-nine economists pencilled in a raise while 25 expected no change, making it the closest call since the timing of the first hike moved to early 2016 from end-2015 seven months ago.

One economist still expects a hike this year.

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The BoE and the Fed are the only two major central banks expected to tighten policy soon and there has been a lot of debate over the timing of their initial moves.

With the US Federal Open Market Committee taking a pass on hiking rates for the first time in nearly a decade earlier this month, uncertainty over the BoE’s policy path has heightened.

Economists were similarly divided before the Fed’s September meeting with only a small majority correctly predicting no change.

“Because of the FOMC’s delay in raising the (Fed) funds rate target, it seems likely the UK rate rise will occur later than I previously expected,” said Stephen Lewis at ADM Investor Services.