Interest rates could rise earlier than predicted as another Bank of England policy maker voted in favour of an increase, a move which has been condemned by a leading business group.
Minutes from February’s Monetary Policy Committee (MPC) meeting show that three Bank of England policy makers now back an increase in interest rates, while the remaining six members voted to keep rate at historic 0.5% lows. The committee has come under fire in recent weeks after the Consumer Prices Index rose at an annual rate of 4% in January - double the Bank’s official target.
The British Chambers of Commerce (BCC) has called the increase in interest ‘unwelcome’ and warns that it could hamper the economic recovery and put a strain on business. The group has called for a delay to allow time for the economy to absorb the impact of the government’s deficit reduction plan.
David Kern, chief economist, BCC, said: “Higher VAT, elevated commodity and energy prices, and increased utility rates are intensifying the squeeze on companies and individuals and will not be affected in the near term by higher interest rates. Our view remains that an early increase in rates, at a time when the government is tightening significantly fiscal policy, would increase the threat of derailing the recovery.”
Furthermore, many firms have expressed concern over the impact the increase would cause their recovery and have called for policymakers to consider the small business community.
Celia Donne, regional director at Regus, an office space provider, commented: "Any rise in interest rates spells bad news for the SME sector in the UK. In Q4 2010 we canvassed the views of 1,500 business managers and their number one business concern was ‘taxes rising’.
“If the Bank of England does raise interest rates, policymakers must listen very carefully to the voice of entrepreneurial Britain and put effective measures in place to support small business growth, or risk undermining their contribution to overall economic recovery.”
© Crimson Business. Ltd 2011