Sharply Falling Inflation Expectations Facilitate BoE To Hold Rates

(RTTNews) - Sharply reduced inflation expectations facilitates the Bank of England to keep interest rates down at 0.50 percent for some time to come, IHS Global Insight's Chief UK Economist Howard Archer said in a note.

Quarterly Inflation Expectations survey from the Bank of England showed that about 40 percent of Britons expect a rate hike over the coming twelve months, highest reading since May 2012, and up from 34 percent in November.

Respondents said the current rate of inflation was 3.5 percent, compared to 4.4 percent in November. Consumers' assessment is currently significantly higher than officially reported.

Inflation expectations for the coming year dropped to 2.8 percent, the lowest since 2010, from 3.6 percent.

In February, BoE indicated that interest rate is set to rise in the second quarter of 2015, and any increase in the bank rate should be limited and gradual.

Archer said interest rate is likely to reach 1 percent by end-2015 and 2 percent by end-2016. The central bank will be grateful for any development that facilitates keeping interest rates low, Archer said.