Investor rate rise expectations at three year high

17th September 2014

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Investors’ expectations of an interest rate rise are now at a 3 year high according to a survey of Hargreaves Lansdown investors.Investor confidence is Europe has fallen sharply but is growing in emerging markets.

Some 91% of investors expect an interest rate rise in the next 12 months, according to our monthly Investor Confidence Survey. This is the highest level since May 2011. A significant portion of investors (40%) actually expect interest rate rises in the next 6 months.

However Laith Khalaf, Senior Analyst, Hargreaves Lansdown says a Scottish ‘Yes’ vote could delay such as rise.

“The last time interest rate expectations ran this high was in May 2011, shortly before a rate rise got kicked into the long grass by the Eurozone crisis. The question is whether the Scottish referendum will do the same this time around. Certainly a ‘yes’ vote will give the Bank of England significant pause for thought, as they recalibrate their economic predictions in light of an independent Scotland.”

However, inflation remains contained and wage inflation is negligible, putting no real pressure on the bank to raise rates quickly, and alleviate the strain of low deposit rates felt by savers.

Investor Confidence

Investor confidence in the European stock market has fallen sharply in recent months, from a confidence score of 66% at the beginning of the year, to just 52% now. Poor economic news coming out of the region is likely to be responsible for investors’ wariness.

Meanwhile confidence in Emerging Markets and the Asia Pacific region is going from strength to strength. Confidence in Emerging Markets has risen from a score of 48% at the beginning of the year to 66% now. Asia Pacific shares have gone from a confidence score of 54% to a score of 66% now.

Overall investor confidence is flat, but still above its long term average says the firm. The Investor Confidence Index stood at 104 this month, slightly down on 105 last month. The long term average is 101.

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