BNP Paribas shifts BoE rate hike call to May 2015 from February

Greater uncertainty in capital markets, downside risks to growth in the Eurozone and lower-than-expected inflation in the UK have led markets to pare back their expectations for interest rates hikes in the UK to the third quarter of 2015.

“That would seem to be an over-reaction”, economists at BNP Paribas wrote in a note to clients on Friday evening.

In that regard, they point out how the economy is growing at an above-trend pace, the labour market is tightening quickly and there are early signs of wage growth.

Even so, they believe the outlook has dimmed somewhat. Hence, they now expect the first move up in Bank Rate to come in May 2015 and not in February.