LONDON: The Bank of England (BoE) will be the first major central bank to lift interest rates when it makes a move early next year, jumping the gun on the US Federal Reserve by a few months, a Reuters poll shows.

The BoE will raise its Bank Rate by 25 basis points in the first quarter of 2015 from a record low of 0.5 per cent, while the Fed will wait until the second quarter before lifting the federal funds rate from near zero, the poll of around 85 economists taken this week found.

While both economies are on a firmer footing the central banks will only move in baby steps, mindful that any increase in borrowing costs could threaten the economic rebound.

“We are getting a similar rhetoric from policymakers in both economies. They have made clear they don’t want to act in a hurry,” said Sarah Hewin at Standard Chartered.

“But the pace of activity is probably stronger in the UK than in the US and we are seeing a faster decline in the unemployment rate in the UK.”

Fed Chair Janet Yellen said at the weekend the bank should move cautiously in deciding when to raise interest rates given the labour market remains bruised, echoing repeated statements from BoE Governor Mark Carney who has stressed any increases would be gradual.

A separate Reuters poll earlier this month said the fed funds rate would still only stand at 0.25pc in June and 0.5pc by September 2015.

Similarly, median forecasts in Thursday’s poll showed Britain’s Bank rate would only creep up to stand at 0.75pc in March, 1pc in June and 1.25pc in September.

It will then rise to 1.5pc at the start of 2016 and end that year at 2pc. By the end of 2017 it will still only be 2.75pc — very low by historical standards.

None of the 42 economists who forecast UK rates expect any move when the Bank’s Monetary Policy Committee meets on Sept. 4 and just five of 42 expect any move this year. In a poll ahead of August’s policy meeting 18 of 55 economists had a hike pencilled in before 2014 ends.

Published in Dawn, August 29th, 2014