A rate hike could not be implemented until 2017 according to fixed income fund manager Dickie Hodges, who recently joined Nomura Asset Management.
Mr Hodges said the market has not fully appreciated how long it will be before an interest rate rise takes place in the UK.
“We are in a very low yield, low interest rate environment,” he said. “The rate of increase has slowed and I cannot see an interest rate rise happening any time soon.”
He is predicting that the rise will not be until 2017 or at the earliest the second half of 2016.
This prediction comes after the Bank of England predicted in its latest Inflation Report, released on November 12, that inflation would remain below its 2 per cent target.
The Bank said it expects very low levels of inflation up to the end of next year. It predicts inflation to rise to 1.2 per cent by the end of 2014 and gradually higher to 2 per cent by the end of 2017.
The report said inflation is “more likely than not to fall temporarily below 1 per cent at some point over the next six months”.
Mr Hodges added: “There is not enough sustainability in growth for a pre-emptive interest rate rise.”
Nomura Asset Management is set to launch a new Global Dynamic Bond fund for Mr Hodges and co-manager Ben Bugg at the beginning of next year. It will invest across a full range of fixed income securities.
Mr Hodges was head of high alpha fixed income at Legal and General (L&G). He joined the firm in 2007 and managed the now £1.3bn Dynamic Bond trust. However, he quit the asset manager in April.
