Fiscal policy back in focus

The upward shift in investors’ interest rate expectations over the past month has been remarkable. While it is impossible to predict the timing of the first rate hike with any certainty, we have more confidence in our forecast that interest rates won’t rise as far as investors expect by the end of next year. Meanwhile, all the signs are that the Chancellor will announce some fairly stringent fiscal rules in next Wednesday’s Budget and Spending Review. That may prevent any major net giveaways being announced.