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Future rate rises 'on the cards'

Published On 23 May 2007 at 14:59:29

Small and medium-sized enterprises (SMEs) in the UK are preparing themselves for further interest rate increases in the immediate future, after the Monetary Policy Committee (MPC) published the minutes to its meeting earlier this month.

David Kern, the economic advisor for the British Chamber of Commerce (BCC), said that the minutes "signal a worrying shift to a more hawkish line" from the MPC.

He added: "We are reminded that market expectations signal a high probability of another interest rate rise to 5.75 per cent later in the year.

"It is also worrying that the possibility of an immediate 50 basis points hike in May was seriously discussed.

"There is now a higher probability that a move to 5.75 per cent would be implemented in the next two to three months and even possibly even in June."

While Mr Kern accepted that the MPC had to act to curb inflationary pressure, he also explained that it was important to "avoid monetary overkill" that would hurt the nation's SMEs.

"If an early move to 5.75 per cent proves unavoidable, the MPC must make it clear that they would wait for a considerable time for more data to assess the impact of past increases in the interest rate," Mr Kern concluded.

 

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