Bank of England unlikely to hike interest rates before 2019 but pound could fall further

The Bank of England is unlikely to raise interest rates before 2019, according to a number of economists polled by the BBC.

Analysts and industry experts have suggested Threadneedle Street officials will be reluctant to lift interest rates, which have been at a historic low since August 2016, while Britain is in the process of leaving the European Union.

Half of the respondents added they expect the BoE to raise interest rates in 2019 as they forecast wage growth will outpace inflation in the first six months of the year.

"We believe that policymakers will be reluctant to tighten monetary policy until greater clarity emerges around the UK's post-EU trading framework, and our expectation of declining inflation through 2018 should also reduce the pressure for an interest rate rise," said Stuart Green, of Santander Global Corporate Banking.

Similarly, Andrew Goodwin, senior economist at Oxford Economics, said rates will not be raised until the third quarter of 2019, while Fabrice Montagné, chief UK and Senior European Economist at Barclays said the BoE will not act until "at least 2019".

Others, however, suggested the Bank could act sooner than expected. George Buckley, Nomura's chief UK economist, expects the Monetary Policy Committee to pull the trigger as early as November, while Howard Archer, chief economic adviser at the EY ITEM Club, expects an increase in the fourth quarter of 2018.

However, Archer added he "would not be at all surprised if it was delayed until 2019".

Meanwhile, Heteronomics chief economist Philip Rush and Michael Lee, senior economist at Cambridge Econometrics, expect the MPC to act in May 2018 and in the second or third quarter of 2018 respectively.

Subdued wage growth has been one of the main obstacles to the Bank tightening its monetary policy, an issue which has only been exacerbated by the spike in inflation that has followed the pound's devaluation after the Brexit vote.

Data released last month showed average weekly earnings rose by 2.1% year-on-year in July, beating expectations for a 1.8% reading and higher than the upwardly revised 1.9% gain recorded in the previous month.

When the impact of inflation is factored in, however, real weekly wages fell by 0.5% compared with a year earlier. Inflation held steady at 2.6% in July after hitting a four-year high of 2.9% in May, but economists expect it to rise again in the coming months.

Rush and Archer forecast it will peak at 2.9% in October, while Green, Lee and Goodwin expect it will reach 3% in the final quarter of 2017 before gradually beginning to retreat. Analysts at Morgan Stanley, however, were more pessimistic and forecast inflation will surge to 3.2% in the spring of 2018.

Strategist at the US investment bank also warned the pound is expected to lose a further 10% against the euro by March next year, a forecast echoed by Santander's economists, who expect sterling to drop to $1.25 and 96 euros in the final three months of 2018.