Commenting upon the decision by the MPC not to raise interest rates David Kern, economic adviser to the British Chambers of Commerce, said:"Events over the last few weeks support our view that the MPC should wait before contemplating further increases in UK interest rates. Given the worsening global risks, highlighted by the acute turmoil on the international financial markets, an early hike in the rate could have very harmful effects on business confidence and on the economy's growth prospects. We must avoid at all costs damaging monetary overkill.

"While we acknowledge that inflation remains a potential UK danger, the risks have eased over the past month. The fall in January CPI annual inflation to 2.7% was larger than expected, and there are realistic hopes that CPI inflation would continue to decline steadily over the coming months. The current wage round remains a critical uncertainty. But the evidence so far is relatively benign. Average earnings annual growth has eased slightly in Q4 2006, and remains well below the MPC's danger zone.

"British business is likely to face acute pressures resulting from the cumulative impact of three Bank Rate increases announced since August 2006. A significant slowdown in UK growth is highly likely later in 2007, even if interest rates stay at 5.25%. The new threat of worsening international prospects could exacerbate the downside risks. Against this unsettled background, the MPC must allow time for the measures taken already to work, before rushing to hike rates further."