Interest rate decision leaves business disappointed

04/10/07 16:59

Today’s decision by the Bank of England (BoE) to keep interest rates unchanged has been met with disappointment from businesses.

The BoE’s Monetary Policy Committee (MPC) has voted to keep interest rates stable at 5.75%, in the face of increasing pressure to cut rates.

Business bodies were hoping for a cut in interest rates. The British Chambers of Commerce’s (BCC) economic adviser, David Kern, said:

"British business is disappointed but not entirely surprised by the MPC's decision today to keep interest rates unchanged at 5.75%. Given the worsening economic prospects, both UK and global, a cut today would have been justified and would have been very helpful in restoring confidence.”

The affects on the economy of the global credit crunch and the Northern Rock crisis are yet to be fully assessed, but governor of the Bank, Mervyn King, came under criticism of his handling of the Northern Rock situation, which also dented consumer confidence.

The British Retail Consortium said retailers needed the cut to restore some of this lost confidence. Director general Kevin Hawkins commented:

"Hard pressed consumers needed to see a cut in interest rates today. There is clear evidence that disposable incomes are getting squeezed by higher living costs and the credit crunch and possibility of higher mortgage repayments is making consumers increasingly wary. As a result confidence is slipping.”

Hopes remain that interest rates may come down next month. Hawkins added: “There is only one way for rates to go when the MPC meets again in a month's time and that is down. Consumers and retailers desperately need the relief."