Stephanie Flanders: UK should raise interest rates before the US

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A UK interest rate rise is not imminent but could be sooner than the market is forecasting, says JP Morgan Asset Management chief market strategist Stephanie Flanders.

The UK is widely expected to raise rates after the US has bumped its interest rates up, but Flanders argues the UK could be better placed to increase rates first.

She says: “You have two central banks being very data dependent, specifically on labour data. But if you look at the two sets of data they look different. UK data are stronger, wages growth has been accelerating more.”

Total pay in the UK increased an annual 3.2 per cent in the three months through May, according to the latest figures published by the Office for National Statistics. The figure for the US was 2.2 per cent over the same period, according to the US Bureau of Labor Statistics.

The new UK wage growth data comes a day after Bank of England governor Mark Carney said the time to raise interest rates from a record low is “moving closer”.

The Bank of England, which has kept interest rates at the record low of 0.5 per cent for more than six years, is expected by many to hike rates next year. A US rates hike has been forecasted for September this year instead.