Hodges: Why BoE will not raise interest rates until 2017

Legal & General Investment Management's fixed income manager Richard Hodges has cautioned investors to be prepared for another four years of record low interest rates in the UK.

Hodges, manager of the £1.6bn Dynamic Bond trust, said it will take until 2017 for the Bank of England (BoE) to create an inflationary environment to reduce the UK’s soaring debt-to-GDP levels. Until this occurs and greater levels of growth are evident, Hodges expects interest rates to remain at rock bottom. “The BoE is trying to encourage inflation and will not stop its pursuit until wage inflation comes through, which may take a while to filter through, resulting in interest rates not rising until 2017,” he said. “For this reason, I have 10% of the fund in inflation-linked securi...