Commenting on today’s Monetary Policy Committee (MPC) decision, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:
“UK businesses understand the MPC's decision to leave both interest rates and the quantitative easing programme unchanged. However, in the face of worsening economic situations in the US and Eurozone, and indications that UK growth remains weak, it is important to make every effort to underpin business confidence and avoid a setback. On its part, the government should consider ways of stimulating enterprise and job creation, for example adjusting business taxes, or introducing fiscal measures that encourage investment.
“We are not surprised that the MPC has maintained the QE programme at £200bn. Though some have argued for an increase to £250bn, the MPC has likely delayed such a move due to concerns around inflation, and a reluctance to alter policy too abruptly.
“The risks to the UK economy remain great, and it is important that businesses are able to grow and deliver jobs. Greater clarity on the outlook for interest rates would underpin business confidence. In the past any positive economic news, however modest, has often prompted pressures for higher rates, thus creating new business uncertainties. To avoid this situation from recurring, we believe the MPC should make clear that, unless circumstances improve very significantly, interest rate increases will not be on the agenda for another year. In the US, the Federal Reserve has stated that it expects to keep interest rates at very low levels until at least the middle of 2013. British business would welcome a similar move in this country."