News Column

Fund managers now forecast interest hike before election

June 30, 2014

MICHAEL BIRD



A SURVEY of hundreds of UK fund managers suggests the Bank of England will hike interest rates ahead of the next general election in May 2015.


Barely a quarter of investors expect that the Bank will hold off until the second half of next year to raise interest rates for the first time since the financial crisis.


According to a survey released today by Capital Spreads, nearly two thirds now believe the increase will come later this year, or the early months of next year.


"Clearly investors believe that raising interest rates will happen before the general election, despite political pressure to maintain the status quo until after the hustings," said Capital Spreads' Nick Lewis.


The Bank of England's forward guidance policy initially suggested that rates would not rise until 2016, but the labour market recovery has been much more rapid than policymakers expected.


Almost all the managers polled believe that the UK economy will improve in the next 12 months, with 89 per cent agreeing. Just one per cent of the respondents now believe that it will weaken marginally in the year ahead.


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Source: City A.M. (UK)