Business Recovery and Insolvency Practitioners

NEWS: Interest rate rise unacceptable risk, says BCC

Added: 08/03/2007

The Monetary Policy Committee (MPC) has been urged to reject any further interest rate rises when it meets later this week.

The British Chambers of Commerce (BCC) said that recent "abrupt turmoil in the global markets" made avoiding another rise "imperative".

"The global economic situation is much more fragile and dangerous than the recent euphoria might have indicated," said David Kern, economic advisor to the BCC. "An increase in UK interest rates at this time would pose unacceptable risks for the UK economy and should be forcefully rejected."

He acknowledged that inflation was still a danger and said that further action may be required, but added that the threat seemed to be receding. "Indeed, there are very realistic prospects that UK inflation will decelerate sharply in the next few months," he said.

"A marked slowdown in the pace of growth is highly likely, even if Bank rate stays at 5.25%. A further increase in rates at this time could cause tremendous damage to the economy. British business requires a period of stability in interest rates," he added.

Last month, members of the MPC voted seven to two in favour of keeping the cost of borrowing at 5.25% for the second consecutive month. The committee's March decision will be revealed on Thursday.

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