Responding to the Bank of England ‘s decision to hold interest rates, David Bharier, Deputy Director of Economics and Insights at the British Chambers of Commerce, said: “This hold in the interest rate was expected and will be welcomed by businesses. But with a major bond sell-off pushing up government borrowing costs, and oil prices climbing again, as pipelines come under attack, this was a hawkish hold.
“So far, this volatility has not produced the second-round effects the Bank fears. Pay growth has eased, and at 3.1% inflation remains manageable with the current interest rate. Although a sharp rise in uncertainty always means above-target inflation remains a risk. 
“The difference from the 2022 price crisis is that firms are far less able to absorb further wage increases. Employer national insurance, alone, is up around 45% since the 2024 Budget, increasing the likelihood that firms shed staff or switch to AI to drive growth. As such, our latest forecast expects unemployment to reach 5.4% by 2027.
“For most businesses, the real pressure sits in costs imposed by policy. Some are global, from Brexit and tariffs, but our Cost Stack Calculator shows the heaviest are domestic and mainly linked to the wider cost of employing people.
“Increasing the cost of borrowing does nothing to change this or the price of imported energy. But with the Federal Reserve and European Central Bank both raising interest rates in recent days, the Bank of England may be facing increasing pressure to show action.
“As the Bank notes in its own reports, our data show clearly that business conditions are weakening, with investment intentions at their lowest since the pandemic.
“October’s Budget is fast becoming a crunch point. It must strike a difficult balance between reducing the cost of doing business and keeping the bond markets onside.
“If the Chancellor fails in this task, then business sentiment, and growth, will continue to flatline.”
More detail on the Bank’s decision can be found here.
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