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Rate Expectations. Our view of future interest rate changes

16-Feb-2017

At Kensington, we have access to the latest data from the financial markets and we use this intelligence to predict changes in interest rates. These forecasts inform our product development and we believe they can also be useful for you.

Rate Expectations Feb 2017Each month, we’ll share our forecasts of how we think that the Bank of England Base Rate, 3-month LIBOR and Fixed Rates are likely to change in the future.

Download our February forecast to find out more about our latest predictions for the economic outlook.  As with any prediction, these are based on current circumstances and are likely to change.


The story behind the numbers

After all the uncertainty and volatility which had built up in the UK since the Brexit referendum back in June 2016, markets responded positively to Prime Minister May’s favourable tone during the speech she gave mid-January.

This was evidenced by the pound seeing its biggest daily gain since 2008. The Prime Minister eventually set out her Brexit plans laying out a strong commitment for the UK to leave the EU’s single market. Negotiations are set to begin after the UK triggers article 50 which is expected to happen at the end of March.

The Bank of England’s corporate bond purchase programme surpassed expectations with half of the target already being reached just five months after its launch; The buying programme was totalling £10 billion over an 18-month period, but the latest data released showed that the BoE already purchased £5.2 billion of corporate bonds as the quantitative easing scheme triggered a rush of new issuances in the UK Corporate bond market. 

The markets expect the Bank of England to hold interest rates at their current level at 0.25 basis points for the whole of 2017. However, UK growth and inflation concerns for 2017 continued to weigh on investor sentiment and markets opened February in risk averse mode, with 2 year swap rates trading in the low 60’s range from the lofty highs seen at the end of January.


*Data produced on 7th February 2017