Market View: Rate rise still predicted for 2016

The economist added that the latest GDP figures suggest that the economy is “performing strongly” and should continue to create more jobs, putting upward pressure on wages.

“We forecast the pace of growth to remain similar until the turn of the year, before austerity starts to slow activity.”

Article continues after advert

He added that with external concerns such as Greece subsiding, the MPC will be seriously considering whether it is time to start raising interest rates.

“We expect the Bank to hold fire until early next year, as inflation is currently too low.

“However, once the bank starts to hike rates, we expect them to move at a faster pace than markets are currently pricing, which may put further upward pressure on sterling, and potentially have a negative impact on UK equities, given the importance of overseas earnings.”