(Reuters) - The Bank of England will wait until early 2016 before raising interest rates, but with economic growth forecast to stay steady and inflation below target, even then it is a close call, according to a Reuters poll of economists.
Not long ago, the BoE was expected to be the first major central bank to begin hiking rates from near zero, where they have held for more than half a decade.
But predictions for the timing of when BoE Governor Mark Carney and the Monetary Policy Committee will finally raise rates have steadily moved further into the future.
The poll of nearly 60 economists taken over the past week suggested the first move would come in early 2016, the same as an April 1 poll, but the contributors only attached a median 60 percent likelihood of a first move by the end of next March.
As recently as October, that first rate hike was expected to have already been delivered. But minutes published earlier on Wednesday showed all nine members of the bank’s Monetary Policy Council voted to leave rates on hold this month.
By the middle of next year, there was a 75 percent chance the Bank will have hiked rates and an 85 percent chance by the end of 2016. But that leaves some expecting the Bank not to move at all until the year after.
“We expect inflation to remain below target through the end of 2016, and with the UK economy slowing, possibly faster than some are expecting, it is hard to envisage a rate rise before 2017,” said Oliver Jones, economist at Fathom.
Even those who expect an earlier move do not envisage rates rising quickly. Governor Carney has repeatedly stressed policy tightening will be gradual.
Median forecasts from the poll suggest Bank Rate will sit at 1.25 percent at the end of next year and a still historically low 2.00 percent at the end of 2017.
While the British economy has outpaced many of its peers in recent years, tumbling oil prices have sent inflation down to zero, and even lower in the euro zone, Britain’s biggest trading partner.
The BoE targets inflation at 2 percent. Very few economists expect it to be back there before June 2016, the end of the forecast horizon. The median forecast shows inflation averaging only 1.7 percent next year, reaching target by 2017.
British gross domestic product grew by 0.6 percent in the three months to December and is expected to expand around the same per quarter through to the middle of next year.
Britons go the polls on May 7 in what is likely to be one of the closest-fought national elections in decades.
Polling by Aara Ramesh and Khushboo Mittal; Editing by Ross Finley and John Stonestreet