UK interest unlikely to rise in 2014

Frances colour

At least that is the consensus of the UK’s top economists in a poll recently conducted by the BBC.

The majority of those asked, 93% of the 28 economists polled, think rates will still be 0.5% at the end of 2014; with more than half predicting the first rise in the second half of 2015.

More than 40% believe unemployment will fall to 7% in 2014, from 7.4% now.  The unemployment rate of 7% is significant because this is the level the Bank of England has said needs to be breached before it will consider raising interest rates.

Two-thirds also think wage increases will overtake inflation this year.

This snapshot of views suggests there is less certainty in the City about unemployment levels than there is about interest rates.

Although more than 40% of those polled think the jobless rate will hit 7% this year, exactly half think that will not be until 2015. Just 8% think it will not be until 2016.

Three respondents actually believe rates will rise before unemployment falls to 7%, which would mean the Bank abandoning its forward guidance on interest rates.

Finally, the economists were asked their views on the Eurozone crisis.  Half think the crisis is not yet over, and of those who think that it is, many believe it could easily flare up again.

One-third of the economists polled think the Eurozone economy will grow by more than 1% this year, while two-thirds think it will grow by less than 1%.

Almost 20% think growth will be as low as 0.5% or less.