Base Rate  

Interest rate rises predicted to continue

Interest rate rises predicted to continue

The Bank of England will probably continue to increase the base rate despite low levels of growth, according to Rathbones's Edward Smith.

The asset manager's head of asset allocation research told the Personal Investment Management & Financial Advice Association conference that he was forecasting growth of around 1.5 per cent next year.

Mr Smith said: "That is about as fast as the UK economy can grow based on its structural components.

"Even though growth is low it is probably at about potential. But there is uncertainty and that is causing a lot of stress."

Because growth was at potential, Mr Smith said he expected the Bank of England to continue putting rates up.

Richard Grenfell-Hill, chief economist at Diageo, agreed growth would sit at around 1.5 per cent.

During this week's Budget, the Office for Budget Responsibility forecast that growth during 2018 would be 1.3 per cent.

In August the Bank of England increased the base rate to 0.75 per cent, the highest level since the financial crisis.

The Bank's governor Mark Carney repeated his long stated view that any increase in the UK base rate from here on was likely to be "gradual" and that rates would peak at a lower level this time than they have in the past.

damian.fantato@ft.com