Majority expect rate rise delay beyond 2016

60% of investors aged 40-75 expect the Bank of England to keep the base rate at its record low of 0.5% this year.

2017 is the most popular date when it comes to UK investors’ expectations for the first rate rise, with 41% predicting the base rate will rise next year.

CPI came in at just 0.3% in January, up marginally from the 0.2% reading in December, according to the ONS. It was the third month in a row that CPI has risen, but the BoE has nonetheless forecast that inflation is unlikely to hit its 2% target until 2017.

Millennials are even more dismissive of a potential rate rise this year, with less than a third (28%) expecting action from the BoE.

Millennials are particularly fearful of a move to normalise interest rates, with three quarters (77%) concerned it will derail the UK’s economic recovery. In contrast, only 39% of those aged 40+ believed a rising rate environment would damage the UK economy.

Adam Gent, Head of UK Sales, Legg Mason said:

“Investors have always followed interest rates closely because of their focus on deriving an income from their savings and investments.

“Having been told consistently rates will stay ‘lower for longer’ it is perhaps no surprise they expect the first base rate rise to be delayed beyond 2016. In such an environment, income-producing risk assets remain pivotal for many UK investors, and we see nothing on the immediate horizon that will dampen their enthusiasm for investments that produce a decent real yield.”