Old Mutual Global Investors chief executive Richard Buxton says the Bank of England might be forced to raise interest rates next year despite the UK economy “gradually decelerating”.
Speaking at an event in London yesterday, Buxton said with the US likely to increase rates this month BoE governor Mark Carney may have to act as well and hike rates in the UK.
Following recent remarks on the outlook for the UK where he suggested a slower growth path for 2017, Buxton reiterated the UK is not going to face a recession next year. But he believes it will be a more difficult year for stock pickers like OMGI.
Buxton says:“The [Federal Reserve] will raise rates soon and Carney is facing 180 degrees in the wrong direction.
“Carney won’t want the interest rate differential between the US and UK to be too great otherwise it will put more pressure on sterling. He may have to raise rates as the economy deteriorates.”
Buxton added the Bank reaction to the Brexit vote has been “a mistake” and counterproductive since the interest rate cut was triggered by a too pessimistic economic outlook following the referendum vote.
Separately, the OMGI chief commented on the recent report from the FCA which found active management is failing to provide value for money for investors.
Buxton says the FCA is “promoting passives” saying there was “always scope” to hamper the fund management industry through “unintended consequences of regulations”.
He says: “Fee pressure is not something I worry about.The regulator has a very price-conscious mindset and they highlight that many advisers tend not to promote passives.”
Buxton claims there is “less pressure on fees than you might think” as many clients either invest in passives with low fees, or they do not mind paying higher fees for funds with high conviction.