Interest rates will not rise this year and are unlikely to rise past 2 per cent in the next 18 months, according to Schroders head of UK equities Richard Buxton.
Buxton says the Bank of England will not want to be aggressive with interest rates due to continued concerns about the economy and the fact that many of the factors affecting inflation are outside its control.
He say: “Interest rates won’t rise this year. I don’t think the bank is going to move early or aggressively on interest rates firstly because it is very worried about the fragility of the UK economy and most of the things that are affecting inflation at the moment are outside the Bank of England’s control such as a rise in taxes, increase in VAT and higher oil prices.”
“I cannot see rates rising to as high as two per cent at any stage in the next 18 months because of the fragility of the economy. King is concerned that the effect of spending cuts has not been felt yet.”
The base rate has been at the all-time low of 0.5 per cent since March 2009.