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Economists’ consensus: No rate rise until November

by: Professional Adviser
  • 05/01/2015
  • 0
Economists’ consensus: No rate rise until November
The government will fail to deliver planned spending cuts within the next Parliament and interest rate rises are off the table until summer at least, according to a survey of economists.

In the annual Financial Times survey of more than 80 prominent economists, a majority of those surveyed said the government will deviate at some point over the next Parliament from its plans to cut spending further.

Some 52 of the 87 who answered a question on spending said the next government will deviate from the plans, which are aimed at reducing the UK’s current account deficit.

A further 12 believe the outcome will depend on the election result, with the remaining 19 believing the next government will hold firm whatever the outcome.

A number of the economists added that continuing to cut spending as planned was unlikely to be successful or “desirable”, according to the paper’s study.

Economists also viewed with scepticism the theory that the Bank of England will raise rates in the first half of this year. Of the 85 who commented, none believed that the Bank will raise interest rates – currently at a historic low of 0.5% – before the summer.

A majority thought the first rise will not come until November at the earliest. Despite this, 25 of the economists felt that rate rises should come sooner – with some saying they should have already risen.

Those surveyed also suggested uncertainty surrounding the general election in May could dampen the recovery, though they did predict growth will be maintained over the next 12 months.

The upcoming election is touted as one of the most significant in decades, with the result widely perceived as being too close to call.

Another voters’ decision also weighted on recipients’ minds, however: a majority of those surveyed told the FT they would cut their growth forecasts in the event of a referendum on the UK’s EU membership.

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