British businesses have accepted the Bank of England’s decision to increase the interest rate this month as ‘necessary’.
Earlier today the Monetary Policy Committee (MPC) voted to raise the interest rate by 0.25% to 5.5%, claiming that this increase was needed to curb inflation.
According to figures from the Office of National Statistics (ONS) CPI inflation rose to 3.1% in March, up from 2.8% in February and well above the government’s target of 2%.
British businesses have supported the MPC’s decision, agreeing that the rise was both inevitable and justifiable given the current economic climate.
David Kern, economic adviser at the British Chambers of Commerce (BCC) said: “The decision to raise the base rate was necessary in order restore credibility after the recent shock increase in CPI inflation to 3.1%.
However, businesses have warned the MPC against monetary policy ‘overkill’ in the months to come.
“Manufacturers will accept today’s rise as a price to pay to help bring inflation down and underpin the credibility of the 2% target,” said Steve Radley, chief economist at manufacturers’ organisation EEF.
“However, the case for further action in the coming months is far from proven with inflation set to fall and wage rises under control.”
Kern agreed that previous rate rises must be given a chance to work.
“UK disposable incomes are being squeezed, spending is set to decelerate, and growth will inevitably slow.
“At this stage, calls in some quarters for further Bank Rate increases in the near future are misguided and potentially dangerous.”
© Crimson Business Ltd. 2007
