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Business leaders cautiously acknowledge rate rise

Published On 10 May 2007 at 12:55:37

Business leaders acknowledged that today's (May 10th) decision to increase interest rates by 0.25 per cent to 5.5 per cent was probably needed, but have urged caution in the future.

The Monetary Policy Committee decided to increase interest rates after figures released earlier this month showed that consumer price index (CPI) inflation reached 3.1 per cent last month.

Factors such as stronger than anticipated business investment and underlying growth in consumer spending are also thought to have contributed to the committee's decision.

The economic advisor for the Confederation of British Businesses (CBI), Ian McCafferty, said the move was "widely expected", but added: "While we fully accept the need for today's rate rise, we see no reason for a further increase at present.

"The impact of the one per cent increase in rates since last August should be sufficient to keep inflation pressures into 2008 under control."

Similarly, David Kern, the British Chamber of Commerce's economic adviser, said "the decision to raise the base rate was necessary in order restore credibility after the recent shock increase in CPI inflation".

However, Mr Kern warned: "The three interest rate increases implemented since August 2006 are already having harmful effects on British business.

"Today's fourth increase in rates will inevitably exacerbate the pain and heighten future risks."

 

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