Though the consensus is for a first hike in H1 2015, the chief investment officer has joined a growing number of investors who predict the central bank’s Monetary Policy Committee (MPC) will err on the side of caution.
Jones believes the MPC will submit to the pressures of slowing growth and hold off from hiking rates for another year.
The CIO (pictured) said: “The rhetoric from central banks continues to differ from their actions. They have had a core bias to support growth and ignore inflation since the credit crisis, and I think that will persist next year. We do not expect a rate rise in the UK next year.”
Minutes from the MPC’s latest meeting in November showed two members of the committee remain in favour of a 0.25% rate hike, but Jones expects the majority of members to continue voting to hold rates at ultra-low levels.
He also warned inflation could fall below 1% by the end of this year: “Inflation will fall in the near term in the UK, before heading back towards the 2% target.
“It is unlikely to suddenly start shooting higher thanks to the period of strength the pound enjoyed at the start of this year, and because there continues to be little wage inflation.”
With GDP figures unlikely to accelerate meaningfully in the coming months, he expects the Bank of England to stick to the ‘growth at any cost’ mantra in the near term, which will deter policymakers from a rate hike.
In contrast, Jones said the US economy is in far better shape to deal with higher rates, and expects the Federal Reserve will begin raising rates in 2015 to prevent an inflationary spike.
