LONDON Britain's impending referendum on European Union membership is casting a shadow over the economy but really it's the macro picture stopping the Bank of England from raising interest rates, the top UK forecaster in Reuters polls last year says.
"No upward trend in core inflation, fairly subdued wage growth and half a percent headline inflation doesn't look like a recipe for a rate hike from the Bank of England this year," said Dominic Bryant, senior European economist and head of UK economics at BNP Paribas.
"And you can add in the uncertainty surrounding the referendum."
Bryant recently shifted his forecast back for when the Bank would raise rates from their record low of 0.5 percent from May. The latest Reuters poll suggests it will be the fourth quarter, while markets are not pricing in a move until 2018.
"I've pushed it back to February 2017. I'm not a great fan of shifting central bank forecasts based on oil price movements but the fall we have seen is so substantial that it has had a material effect," Bryant said.
Oil has lost more than 70 percent of its value over the past year and a half and British inflation is nowhere near the Bank's 2 percent target. According to a recent Reuters poll, it won't get there until 2017 at the earliest. [ECILT/GB]
That poll also predicted Britain's economy would grow 2.3 percent this year but Bryant is more pessimistic, pencilling in a 1.7 percent expansion.
"People often say to me that is quite low but the line I take is that I think it is around potential for the UK economy at present. People expect too much from the UK as to how quick it can grow on a sustained basis," Bryant said.
"Growth averaged 2.4 percent from 2013-2015, which must be some way above trend, given the unemployment rate has fallen quickly."
Bryant topped the list economists graded by StarMine for accuracy on a set of key monthly data releases in 2015, including GDP, inflation and unemployment rate as well as the purchasing managers' surveys of business activity.
(Other stories on top forecasters in Reuters Polls:)
(Editing by Jeremy Gaunt)