Experts believe British central bank not to raise interest rates again until May

LONDON, Dec. 13 (Xinhua) -- Strong inflation figures and a low unemployment rate will not cause the central bank, the Bank of England (BoE), to raise interest rates on Thursday, according to experts.

The BoE's rate-setting Monetary Policy Committee (MPC) met earlier in the week, and its judgment to be announced on Thursday afternoon is very likely to be that there will be no rise from the 0.5 percent rate.

The BoE raised the bank rate in November, from its record low of 0.25 percent which had been reached when the central bank cut the rate in August last year as a stimulus.

November's rise was the first increase since July 2007, and was an unwinding of expansionary measures taken to stimulate the economy in the immediate aftermath of the Brexit referendum vote.

BoE governor Mark Carney has indicated that the central bank will push interest rates up in a "gentle" rise, linked to the forecast fall in inflation from its current five-year high of 3.1 percent.

Figures for joblessness released on Wednesday showed a rate of 4.3 percent, the lowest for 42 years, and figures which before the financial crisis would have indicated an economy that had reached capacity and where growth needed reining in.

Amit Kara, head of British macroeconomic research at the independent economics think-thank, the National Institute of Economic and Social Research (NIESR) said that he expected no rise in the bank rate at this meeting, but he did expect a gradual series of rises next year and the year after.

"Inflation will not affect the BoE's December rate-setting decision. Our view is that the bank will hold off the next rate increase until May next year," Kara told Xinhua in an exclusive interview.

"UK economic activity has picked-up in the second half of this year and GDP growth at 0.5 percent is somewhat higher than the economy's speed limit," Kara said.

"If, as we expect, the economy continues to expand around this pace and inflation remains elevated, there is a case for the Bank of England to gradually raise the policy rate to stop the economy from overheating."

Kara forecast a series of rises in the rate, each of 25 basis points, every six months to take the rate to 2 percent in 2021.

Against a background of low productivity, and of inflation outstripping annual wage growth the November BoE rate rise was not needed, argued Geoff Tily, senior economist at the Trades Union Congress (TUC), the major union organization.

That applied for any prospect of rate rises in 2018, according to Tily.

"The last increase was worrying. We don't see an economy that is really in a position to take interest rate rises," Tily told Xinhua in an exclusive interview on Wednesday afternoon.

The sharp rise in inflation from 0.5 percent in the month before the June 2016 Brexit referendum vote to 3.1 percent this November, revealed in figures released on Tuesday, is due to sterling's big post-referendum fall on foreign exchange markets.

"We have inflation that is very much an effect of the sterling rate. Wage inflation is non-existent. There is no evidence that price inflation is going through to wages," said Tily.

"At the same time we have increasingly indebted households who are having to resort to unsecured borrowing to tide themselves so it's hard to see what good any interest rate rises can do."

Tily said he believed that the BoE should not be left almost entirely alone to bear the burden of stimulating economic growth, through monetary measures.

"I can understand the BoE fed up that there is this reliance on monetary policy to keep the economy afloat, it is a dangerous position," he said.

Tily called for more stimulus through monetary policy, which has been characterized by big cutbacks in government spending since June 2010 and which is forecast to continue further until 2022, the lifetime of the current parliament. Enditem