“These figures complicate the Monetary Policy Committee’s job. Given the weak economy and the serious pressures still facing businesses, it would be wrong for the Bank to overreact to a rise in inflation that is likely to prove temporary.
“Clearly, the MPC cannot ignore the risk that inflationary expectations could worsen, particularly if sterling continues to weaken. However, this risky backdrop makes it even more important for the new Government to urgently produce a detailed plan for reducing our unsustainable Budget deficit.
“If the market regains confidence in the UK’s ability to deal with the deficit, it will be easier for the MPC to maintain low interest rates for a prolonged period. Low interest rates make it possible for businesses to drive and sustain the economic recovery.”
Dr Adam Marshall, Director of Policy at British Chambers of Commerce (BCC), added:
“We in the business community see two ingredients as fundamental to recovery. Deficit reduction to deliver confidence and low interest rates to encourage investment. It is absolutely critical that we get both right.”