A survey of economists has revealed that UK interest rates are not expected to rise until 2019, despite inflation being above the Bank of England’s target.
A BBC survey found that the majority of economists believed the Bank of England Monetary Policy Committee (MPC) would not raise interest rates while Brexit negotiations are ongoing. Inflation is currently at 2.6%, above the official target rate of 2%.
The base interest rate has been at the record low of 0.25% since August 2016. Prior to that it stood at 0.5% since March 2009.
External MPC member Michael Saunders said in August that he thought interest rates should be raised soon to offset inflation. Saunders told a Cardiff conference: “We do not need to be putting the brakes on so much that the economy weakens sharply, but our foot no longer needs to be quite so firmly on the accelerator in my view.”
However, in the August meeting of the MPC, only Saunders and fellow member Ian McCafferty voted for an interest rate rise. The remaining six members voted to retain the current interest rate.
Saunders said that an increasingly constrained labour market, partly due to fewer EU migrant workers coming to the UK, pointed to a need for higher interest rates. In Q2 2017 the proportion of people aged 16-64 participating in the labour market reached a record high.