‘Good chance’ of rate rise this year: Old Mutual

The Bank of England could raise the base interest rate from its record low level before the end of this year, according to Old Mutual Global Investors’ head of fixed income Christine Johnson.

Ms Johnson, manager of the Monthly Income Bond and Corporate Bond funds, said investors needed to “start to think about how to protect from rising rates”.

She said: “I think there is a good chance there will be a rate rise this year. [Bank of England governor] Mark Carney is signalling that we have to think about what a rate rise might mean. It’s happening sooner rather than later.

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“The UK economy is doing much better and I expect there is going to be a little hop in growth expectations for the UK in the Budget this week.”

Ms Johnson’s view echoes that of M&G’s multi-asset managers Stephen Andrew and Eric Lonergan, who have positioned their funds to benefit from their forecast that interest rates in the UK will rise sooner than expected but will settle at a level lower than expected.

The base interest rate has been 0.5 per cent for five years since the height of the financial crisis in a bid to force investors out of cash and stimulate asset growth.

The Bank of England initially indicated that it would reassess the case for ultra-low rates when the unemployment rate reached 7 per cent, but it has since removed this as an indicator.