Commenting on today’s MPC decision, David Kern, British Chambers of Commerce Economic Adviser said:

"After the release of the BCC's quarterly economic survey which reached nearly 5000 UK businesses, we are not surprised by the MPC's decision and it was almost universally expected. With CPI annual inflation likely to increase in the next few months, and with the Governor expected to write at least two additional letters to the Chancellor this year, the MPC must strive to maintain credibility.

"Our members are very concerned about inflation and we have not called for an immediate interest rate cut. But the MPC cannot ignore the fact that the economic situation, as highlighted in our latest quarterly survey, has deteriorated at an alarming pace. Business confidence has plunged to historically low levels and countering the risk of recession must be an overriding priority.

"With hikes in oil prices, temporary increases in inflation in the short term are unavoidable. It would be a serious mistake to try and deal with this by clobbering the economy with higher interest rates.

"As consumers continue to feel a squeeze on cash in their pockets and house prices continue to fall, it is clear prices can't stay high for long. With that in mind, there will be a sharp downward pressure on CPI inflation later in the year, and inflation could fall well below target in 2009.

"The acute deterioration in the cashflow position of many businesses heightens threats of a serious credit crunch. Though a major recession can still be avoided, it is imperative to nurture confidence. The MPC must proceed with caution. But, if wage pressures remain muted, it would be right to consider a small interest rate cut later in the autumn."