Commenting on the Monetary Policy Committee (MPC) minutes published today, David Kern, Chief Economist at the British Chambers of Commerce, said:
“The MPC minutes show that the balance of opinion on the committee remained unchanged. Six members voted to keep rates and QE on hold, three voted for an increase in interest rates, and one supported an increase in QE from £200bn to £250bn.
“Following the CPI figures showing an increase in inflation to 4.5%, the pressures facing the MPC have intensified. The tough austerity measures that are being implemented will inevitably reduce demand in the economy over the coming months. Disposable incomes will be squeezed, and businesses and individuals will feel the pinch. In these circumstances, a premature increase in interest rates would threaten to derail the recovery.
“While we accept that interest rates will have to increase towards the end of the year, there is no evidence that wage pressures are strengthening. Against this background, the MPC must hold its nerve and postpone interest rate increases until the recovery is more secure.”