Capital Economics picks rapid US interest rate rise
Research firm Capital Economics has forecast faster rate hikes in the United States off the back of unemployment data.
Policy rates in the US are heading for 3% by 2016, but only around 1% for the UK, it said in a note.
Capital Economics senior global economist Andrew Kenningham said while US and UK unemployment rates had declined in step over the last three and a half years, the US rate will decline faster between now and the end of 2017.
Kenningham believed the UK economy will grow without a sharp rise in employment, aided by an increasing labour supply.
In contrast productivity growth in the US is likely to remain subdued, he said.
The economist said while there is plenty of uncertainty surrounding productivity growth and labour supply, it is likely that core inflation will rise above the US Federal Reserve’s 2% target, but remain below the UK’s target.