'Sooner than expected' interest rate rise may happen later

By Natasha Adamson

In June of this year Mark Carney warned that an interest rate rise may arrive sooner than expected, prompting speculation of an increase at the start of 2015, and then later revised to a hike before the end of 2014.

The Monetary Policy Committee (MPC) of the Bank of England has again voted to maintain the interest rate freeze at 0.5 per cent for another month. Minutes of the meeting from October revealed that only 2 of the 9 MPC members voted for an increase, and few expect that number to have gone up in light of poor economic news in the past weeks. In fact, economists are now predicting that an interest rate increase may not happen in early 2015 at all, and may only come well into next year.

The Governor of the Bank of England started in the position keen to provide clear indicators on the future of interest rates. He said that an increase would not happen until the rate of unemployment fell to 7 per cent. When that target rate was reached interest rates remained frozen, with Carney saying that other factors would also be looked at. In June of this year he warned that an interest rate increase could happen sooner than people expected - at that time it was anticipated that the rate would remain frozen into the second half of 2015. Economists speculated that an increase would happen before the end of 2014 to avoid a bad news story during election campaigning next year.

Now it seems however that the 'sooner than expected' interest rate increase will happen later - in fact, it is now likely to take place when it was expected, towards the second half of 2015.

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