According to a survey by Capital Spreads, the vast majority of fund managers working in the UK are pencilling in a rate rise before the 7 May election.
Just one quarter of the 200 City investors questioned said the Bank of England will wait until the second half of the year – after the general election – to raise the base rate.
Meanwhile, only 9% expect Governor Mark Carney (pictured) will stick to his original pledge to keep rates low until 2016 or beyond.
The findings come against a backdrop of increased confidence. The proportion of fund managers expecting the UK economy to strengthen this year has jumped from 84% in Q1 to 89%. Roughly a fifth said the economy will “improve significantly”.
Investors’ views also chime with recent signals from the Bank of England, with Carney suggesting interest rates may reach 2.5% by 2017.
Capital Spreads head of trading and market risk Nick Lewis said confidence in the UK economy is close to sky high: “Clearly, however, we are entering a new economic debating chamber – the thorny issue of interest rate rises,” he said.
“The aforementioned positive economic news is creating a very convincing argument for raising rates before Mark Carney’s forward guidance indication of 2016 at the earliest.
“Whether the guidance was in fact misguided is a moot point – investors believe that interest rates will rise before the general election, despite political pressure to maintain the status quo until after the hustings.”
