David Miles, the external member of the Monetary Policy Committee (MPC), said current views in the market are for rates to stay on hold until late 2014 given inflation expectations.
Miles, delivering a speech to business leaders in Manchester, said: “That pattern of market rates implied that the first increase in Bank Rate might not come until the second half of 2014.”
Miles was discussing the latest fan chart predictions for CPI, based on market interest rate expectations and quantitative easing (QE).
The assumptions are subject to change, and would clearly be affected if the Bank of England embarked on a further round of QE, or if inflation data spikes.
However, it nonetheless reveals the expectations of investors that low rates are here to stay for another two years at least.
Miles stressed the assumptions on Bank rate and the stock of asset purchases are not forecasts from the Bank itself, but his own opinion.
Summing up his views on QE and its impact, Miles added he is positive the economic impact has been beneficial.
“Many people would have been worse off,” he said. “Unemployment would have been even higher than it currently is.”
