Commenting on today's CPI inflation figures, David Kern, Economic Adviser to the British Chambers of Commerce, said: "Annual CPI inflation, at 3.8% in June was worse than expected. Coming after yesterday's poor producer price inflation statistics, the new figures highlight the acute pressures facing consumers and businesses. Margins are facing a real squeeze.

 

"Nevertheless, we believe it would be a serious mistake to react to the upsurge in inflation by raising interest rates. Further increases in CPI inflation, to levels above 4%, are inevitable in the next few months whatever the MPC decides to do. But the impact of higher interest rates on the real economy would be devastating, especially while all the evidence suggests that inflation will fall sharply later in the year and in 2009."Against this background, we urge the MPC to keep interest rates on hold at 5% for the next few months and consider modest cuts later in the year once inflation has peaked