Managers split on inflation as Ward calls for a rate increase

Henderson chief economist Simon Ward believes there is more than a 50% chance of a hike in interest rates by the end of the year, as the MPC looks to curb rising inflationary pressures.

Ward’s contrarian call is at odds with high-profile bond managers M&G and Invesco Perpetual, which expect the UK base rate to remain unchanged in the near term, perhaps for a number of years. Data released last week showed a surprise 0.2% rise in core inflation – which strips out food, alcohol, energy and tobacco prices from the Consumer Prices Index (CPI).  This was 0.3% above consensus expectations. Although CPI itself actually fell from 3.2% to 3.1%, it still remains above the 2% target, forcing Bank of England governor Mervyn King to write an open letter to the Chancellor. Ward...