Business groups are ‘disappointed but not surprised’ with the Bank of England’s decision to keep the base interest rate on hold at 5.5%.
The Bank’s Monetary Policy Committee (MPC) last cut the rate in December from 5.75% to the current rate.
Retailers had been calling for a lowering of the rate after disappointing sales over Christmas and a decline in consumer confidence.
However, many economists suggested the decision to lower rates had to be balanced against rising inflation.
The British Chambers of Commerce (BCC) claimed the Bank had ‘missed an important opportunity to underpin confidence and limit the damage to the economy’ by maintaining the current rate.
“A modest interest rate cut would have alleviated the threats to the banking system and would have helped restore the smooth flow of credit in the economy,” said David Kern, BCC economic adviser.
"Sterling’s recent weakness poses inflationary risks but delaying unduly a modest and much-needed interest rate cut could worsen the downturn in the economy, triggering bigger and more dangerous falls in the pound.”
Manufacturers’ organisation the EEF said it believed the growing risk of a US recession, knock on effects of the credit crunch and a possible housing slump ‘outweighed reasons for delay’ in cutting the rate.
EEF chief economist Steve Radley, said:
“The evidence from the past month points to a growing risk of a weaker economy and there is little reason to believe the case for a cut will be any less strong next month.”
© Crimson Business Ltd. 2008