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East Midlands Chamber News

Chamber reacts to interest rates rise

Commenting on today’s interest rate decision by the Bank of England’s Monetary Policy Committee, Chris Hobson, Director of Policy at the Chamber, said: “Our preferred outcome was for a further period of monetary stability, with interest rates retained at their historic low for the near term.

“However, today’s quarter of a percentage point rise may have little effect on most companies, although some will view this as the first step in a longer policy movement, which could defer investment.

“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 undershooting 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 Budget to boost business confidence for investment and reduce burdens such as business rates hikes.”

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