Bank of England's First Interest Rate Rise in May 2016

More economists have pushed back on their forecasts for the first Bank of England interest rate rise in years.

The timing of interest rate rises remains front and centre for the British pound - as a general rule of thumb if the date for the first rate is pushed back so the value of the currency falls.

It is therefore a bearish event for the UK currency when markets and leading investment bank researchers push back their expectations for that first rate rise, and subsequent follow up rises.

We have heard from yet more institutional researchers that May 2016 is now their preferred date.

Foreign exchange brokers Smart Currency Business have blamed the most recent decline in sterling on the announcement that Nomura had pushed back their expectations for a UK interest rate hike to May 2016, sterling then dropped close to the recent five-month lows against both the euro and US dollar.

Joining Nomura are RBC Capital who have told clients that they now look for the Bank Rate to be held steady for the remainder of 2015 with the first increase not occurring until May 2016.

"With wage growth potentially providing less inflationary pressure than previously assumed, a delayed start to Fed tightening, and more uncertain global growth outlook, we expect the BoE will take a slightly more cautious approach to normalising monetary policy," say RBC Capital in a monthly interest rate forecast to clients.

Bank of America Merrill Lynch Global Research have meanwhile confirmed that an expected delay to US interest rate rises has them putting back their own forecasts for the Bank of England.

"Our BoE rate hike call has been a very close one since the Fed delayed lift-off in September. Last week’s softer US data and our US colleague’s subsequent revisions to their trajectory for Fed hikes were enough to tip us over the edge. We now look for the BoE to start hiking rates in May, rather than February," says Robert Wood, UK Economist at BofA.

The investment bank looks for two 25bp hikes next year – the second one in November – rather than three previously.

The latest services PMI poses the risk that hikes could be delayed for longer.

"But that PMI is an outlier relative to other growth indicators, so, for now, we are not placing much weight on it," says Wood.