Why interest rates won't rise any time soon Coupled with that you've got Sainsbury's recent decision to cut 1,200 prices and mild autumn weather pushing down on clothing prices. All in all, if they forecast sub-1pc inflation they're conceding that Carney's going to have to write a letter and the market will push back the first hike even more than it already has done. In June, Mr Carney said the decision surrounding the timing of the first rate increase "could happen sooner than markets expect," prompting traders to price in a November rate hike. However, an oil glut, the slowdown in the eurozone and falling inflation means markets now expect the Bank to raise rates in August 2015, well after May's election. Andrew Haldane, the Bank of England's chief economist, said in a speech last month that a "gloomier" global outlook and lower inflation suggested that policymakers could afford to keep interest rates lower for longer. The Deputy Governor, Sir Jon Cunliffe, said in a separate speech that with interest rates already at a record low of 0.5pc, dealing with an inflation spike would be "more manageable" than raising rates too early and having to change course. However, Martin Weale, an external rate setter who has voted to tighten monetary policy for the past three months, has argued that the Bank should "look through" the current drop in inflation because it is driven by forces that are beyond the Bank's control, as the Monetary Policy Committee did in 2008, when price rises spiked to 5.2pc. When will interest rates rise? Simon Wells, chief UK economist at HSBC and a former Bank economist, said pay growth would remain in focus for the nine rate-setters. The first quarter of 2015 is an important time for pay settlements, and if pay surveys continue to suggest starting salaries for new recruits and vacancies are rising and we start to see wages pick up, that would be the signal for me that this economy can withstand an rate rise. The Confederation of Business Industry expects the UK economy to expand this year at the fastest pace since before the financial crisis. Britain's biggest business lobby group expects growth of 3pc in 2014, which would match the expansion in 2006. Growth is then expected to slow to 2.5pc in 2015. The forecasts were unchanged from its September forecasts, despite renewed fears of a triple dip recession in the eurozone. "The recovery is on firm ground and is becoming more ingrained," said John Cridland, the CBI's director general. More: Interest rates need to rise, says Bank of England rebel Martin Weale