When Will Interest Rates Rise?

Better than expected unemployment figures and a fall in UK inflation means some forecasters predict an interest rate rise in just 12 months - two years early

Schroders Investments 14 November, 2013 | 9:48AM
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This article is part of Morningstar's "Perspectives" series, written by third-party contributors. Here, Azad Zangana, European Economist at Schroders, comments on the Bank of England’s Inflation Report.

The Bank of England has updated its forward guidance on interest rates with the publication of the November Inflation Report. Governor Carney explained that stronger than expected demand has helped the unemployment rate to fall faster than expected.

The Bank of England now forecasts the unemployment rate to hit the Bank’s 7% threshold in the second half of 2015, compared to previous guidance which assumed the threshold not being met before the middle of 2016. The latest figures on the unemployment rate show a fall to 7.6% in the three months to September. The change in guidance suggests the Bank of England thinks it will begin to consider raising interest rates over a year earlier than it thought only three months ago.

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