Commenting on the choices facing the MPC at its June 2008 meeting next Thursday, David Kern, Economic Adviser to the British Chambers of Commerce, said:

“Recent dire warnings issued by M&S have been amplified by bleak figures. House prices are falling sharply across all UK regions, and activity in the construction sector is declining at a dramatic pace. Large falls in the FTSE signal deep market pessimism. Bank shares are particularly weak, reflecting fears that a lot more bad debts are still to be revealed. The MPC cannot disregard these worsening threats to growth.

“High oil and food prices will add to inflation in the short term. But the squeeze on businesses and consumers will push down sharply CPI inflation  towards the end of the year and in 2008, very probably to levels well below the two per cent target. Given the strong downward pressures bearing down on activity, an interest rate increase on Thursday would be devastating. We urge the MPC to disregard calls for interest rate increases, and to consider a cut in rates in the coming months.”