Commenting on today’s Monetary Policy Committee (MPC) decision, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:
“UK businesses support today’s MPC decision to leave interest rates unchanged. Given the fragility of the recovery, and the acute pressures facing firms and individuals, the committee was right to reject calls for early rate increases.
“With UK inflation at 4.5 per cent, and set to increase further in the next few months, the MPC is naturally concerned. But tightening policy in reaction to higher utility prices and internationally generated inflation would be a major mistake. Premature rate increases, at a time when the government is tightening fiscal policy through its deficit-cutting programme, could damage jobs and growth and should be avoided.
“Signs that the global economy may be slowing, and the worsening debt problems facing the Eurozone, increase the challenges facing UK exporters and reinforce the case for postponing interest rate increases at least until the final three months of 2011. As long as domestic wage pressures remain muted, the MPC should avoid any action that increases risks of an economic setback. If the economy weakens further, the committee should consider increasing the QE programme above £ 200million.”