INTEREST rates may not increase until 2016 because economic growth has started to slow, according to experts at Britain's biggest bank.

Inflation is expected to have remained at a five-year low when official figures are published today (TUESDAY), as investors predict the Bank of England won't raise interest rates until the final three months of 2015.

However, HSBC now believe a move won't come until even later.

"Red warning lights" are once again flashing over the state of the global economy, the prime minister said yesterday.

David Cameron said weak growth in Europe, a slowdown in Asia and conflicts around the world had created a "dangerous backdrop of instability".

Chancellor George Osborne said the UK was outperforming many other economies but it was vital the government was not "diverted" from its long-term goals.

The measure of Consumer Price Index (CPI) inflation for October is predicted to have stayed unchanged from the previous month at 1.2 per cent.

It comes after last week's warning from Threadneedle Street that CPI would probably fall below 1 per cent over the next six months - which some expect could happen in December. This would prompt governor Mark Carney to have to write a letter of explanation to the Chancellor.

The low inflation environment coupled with warnings of gloom about the world economy has led economists to push back expectations for when the Bank will raise interest rates from 0.5 per cent where they have been held since 2009.

Earlier this year experts had been expecting a rise as soon as this month but the likely timetable has now moved to the second half of 2015.

Simon Wells, chief UK economist at HSBC, went further and predicted that the first hike would not take place until the first quarter of 2016.

He said the Monetary Policy Committee (MPC) looked more worried about unintentionally slowing the economy than it was about inflation.

The cooling in the housing market was also a key factor in enabling policy to remain loose, he said, adding: "In an environment of fragile growth and low inflation, tightening is just too frightening."

Inflation has been kept low by the supermarket price war as well as falling oil prices and the strength of the pound weighing on import costs.

The latest figures will show CPI has been at or below the Bank of England's 2 per cent target for 11 months in a row. A reading of more than 1 per cent higher or lower than this target would prompt an open letter from Mr Carney to George Osborne.

Continued low inflation boosts prospects for an upturn in real pay after a six-year squeeze during which wages have been lagging behind the rise in the cost of living.

Latest figures last week showed pay rising at a still below-inflation 1 per cent though stripping out bonuses the increase was 1.3 per cent. The Bank of England is expecting this to rise to 3.25 per cent for 2015.

However, while low inflation provides relief for hard-pressed households, policy makers would be concerned were it to fall too low as has happened in Europe - which is faced with the threat of a damaging spiral of falling prices.