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First UK interest rate rise is likely in spring 2015

by International Commercial Investment on February 20, 2014

Source: Reuters

The first rise in British interest rates will likely come in the spring of next year, a key Bank of England policymaker said on Thursday, sending British government bond prices sharply lower.

“I think it is very helpful that we try and explain the most likely path for interest rates is that the first rise will come perhaps in the spring of next year, and then the path is likely to be relatively gradual,” Martin Weale, a member of the BoE’s Monetary Policy Committee, told Sky News.

Bank officials have said they are in no rush to raise interest rates, even as they were forced to revamp their forward guidance as the fall in the jobless rate, upon which the policy hinged, was surprisingly fast.

However the BoE’s quarterly forecasts last week did show that previous market expectations of an interest rate rise in the second quarter of 2015 was consistent with the central bank’s aim to keep inflation at its 2 percent target.

British government bond futures extended losses by more than 20 ticks in a flurry of trading after the remark was broadcast, hitting their lowest level in two days at 109.87, some 47 ticks down on the day.

Ten-year gilt yields rose above 2.77 percent, 3 basis points up on the day and their spread over Bunds widened too.

International Commercial InvestmentFirst UK interest rate rise is likely in spring 2015