In an article published in The Guardian, the first rise in UK interest rates could be delayed until autumn 2016, according to City expectations, as market turmoil in China raises the prospect of historically low borrowing costs staying in place for longer than expected. Contemporaneous research by Dr Walter Boettcher, chief economist at Colliers International, provides a contrary outlook to recent escalating anticipation that the UK commercial property market has peaked, has just published a research paper forecasting an alternative near-term view.
Sustained low UK base rates, Dr Boettcher contends, continues to be the more likely path due to: the risk of deflation, high government debt servicing costs, lack of sustained export growth. All of these are macro variables which are very sensitive to interest rates, and therefore make a rate rise unlikely for the foreseeable future.
This suggests scope for further yield compression despite relatively high prices, Dr Boettcher predicts, and beyond the levels seen at the last peak.
Furthermore, the recent Chinese stock market crash, and longer term economic slowdown, is more likely to act as a catalyst for “another wave of global deflation and, if the IMF have their way, imminent global rate increases look set to be pushed back at least into 2016
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