City analysts have begun a major about-turn on their expectations of central bank interest rate rises following the shockwaves rippling through the financial markets amid the rescue takeover of Credit Suisse.
Over 50% of investors now expect the Bank of England to swerve a further interest rate rise when members of its Monetary Policy Committee meet later this week, according to a Refinitiv poll – a huge jump from the roughly 10% who shared that view at the beginning of the month. Over 60% expect the US Federal Reserve to keep rates flat too.
Amit Patel, adviser at Welling-based mortgage broker at Trinity Finance, said: “The Bank of England must now vote to leave rates on hold or vote to decrease the base rate following the announcement that UBS will be buying Credit Suisse.
“We need financial stability in the UK now more than ever and I think if they were to raise rates then this will catastrophically backfire.”
Just two of the Bank’s nine Monetary Policy Committee members voted against an interest rate rise when it last met in February.
Other experts predict that rates will go up this week, but not by as much as the 0.50% previously expected.
James Smith, developed markets economist at Dutch bank ING said: “We’re still narrowly leaning towards a hike this week, though clearly, a lot can change in the days leading up to the meeting.
“We think the Bank of England will probably opt for one final 0.50% hike on Thursday.”
The decision will be announced at noon in London and will affect the rate paid by householders with variable rate mortgages across London and the UK.