Commenting on today’s interest rate decision by the Bank of England’s Monetary Policy Committee, Mike Spicer, Director of Economics at the British Chambers of Commerce (BCC), said:
“Our preferred outcome was for a further period of monetary stability, with interest rates steady over the near term. Today’s quarter point rise may have little effect on most companies, but many will view this as the first step in a longer policy movement – not as a simple reversal of last year’s cut.
“These are challenging times for monetary policymakers. The MPC had the unenviable task of weighing future risks to inflation, from a tight – and tightening – labour market, pass-through from a weaker pound and rising commodity prices. Against this, they needed to consider the future risks to under-shooting the inflation target from weak growth, fragile business confidence, and the effects of uncertainty.
“These are finely-balanced judgements: while interest rates will need to return to historic averages at some point, it should be done slowly and with reference to the ever-changing economic context.
“With the Bank of England’s latest forecasts of sluggish growth for the next few years, the government must use the upcoming Autumn Budget to boost business confidence and investment, and reduce the pressure on prices from policy decisions such as the forthcoming hike in business rates.”
Dale Edwards, Chief Executive of Somerset Chamber of Commerce, commented,
“There was a sense of inevitability that there would be a rate rise at some point before Christmas after listening to the mood music from the Bank of England over the last few weeks and months. Whilst the 0.25% rise should have minimal impact on businesses; if this is the start of future rate rises this could have a significant impact both materially and from a sentiment perspective. With increasing business uncertainty, confidence must not be dented and I call on the Chancellor to make the forthcoming budget, a focus on business growth rather than adding more financial pressures.”