‘Beware false sense of security on economy’

The head of multi-asset from Kames Capital said there was “great desire” from central banks, including the BoE, to suggest their “dramatic actions are bearing fruit”, but it might not come to anything.

He said: “The reality is that, while jobs have been created, they are not as they once were.

“Household disposable income continues to fall in real terms and the world is experiencing a profound deflationary pulse. The idea that monetary policy will do anything other than loosen is ludicrous. Central bankers have no option but to pretend it is working.”

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His comments were echoed by Stewart Cowley, manager of the Old Mutual Global Strategic Bond, who said: “Falling inflation only goes to reflect the difference between what the government’s statisticians are saying and what ordinary people are experiencing.”

Ros Altmann, independent pensions consultant, said that people’s incomes and pensions were still being squeezed. “Interest rates should start rising as the UK economy is really strong. The 0.5 per cent rate reflected an economic emergency.”

Mark Harris, chief executive of national mortgage broker SPF Private Clients, said: “With inflation falling close to its 2 per cent target and the economy still in recovery mode, it is unlikely that the Bank will risk hiking interest rates too soon.”

Adviser view

Zane Hunter, private client partner from national advisory firm Broadstone Pensions and Investments, said: “Mark Carney, governor of the BoE, announced recently that interest rates will be linked to unemployment figures and that consideration would not be given until the jobless rate has fallen to 7 per cent or below. If the recent drop to 7.6 per cent is an indicator of recovery, this could mean that interest rates will rise faster than expected, which would be great news for savers who currently struggle to achieve 1.5 per cent before tax on their deposit funds, even if they tie their money up for a year.”

Old Mutual fund performance:

Stewart Cowley’s Old Mutual Global Strategic Bond fund yields

Share Class: A Accumulation 0.84%

Share Class: A Income 0.839%

Share Class: P Accumulation 1.342%

Share Class: P Income 1.337%

Source: OMGI