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Carney may be forced to raise interest rates in 2017, says top UK fund manager
The Bank of England could be forced to raise interest rates next year despite the likelihood of the British economy deteriorating, according to one of the UK’s leading fund managers.
Veteran investor Richard Buxton, who is head of UK equities at Old Mutual Global Investors and whose career spans more than 30 years, said Bank governor Mark Carney will have to act if the Federal Reserve (the Fed) increases US interest rates.
A decision on US rates will take place later this month and markets now forecast a 100% probability they will be increased, 12 months on from the first hike in December last year.
“The Fed will raise rates soon and Carney is facing 180 degrees in the wrong direction,” he said.
“Carney won’t want the interest rate differential between the US and UK to be too great otherwise it will put more pressure on sterling.
“He may have to raise rates as the economy deteriorates.”
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Buxton (pictured) criticised Carney for cutting rates in the aftermath of the Brexit vote.
“The Bank of England was panic stricken. It was a huge mistake cutting rates from 0.5%. It wasn’t going to get people borrowing.”
He admitted if Carney did raise rates next year, it wouldn’t be by much.
“It won’t be enough to cause a housing market collapse,” he said.
The manager also hit out at peer-to-peer lending, calling it the “next mis-selling scandal”.