Business chiefs uneasy over latest rate rise
Business leaders have been left concerned over the Bank of England's decision to raise interest rates for the second time in three months.
British Chambers of Commerce: rates rise will cause "considerable consternation" among households and businesses
Reacting to the rates rise, Suren Thiru, head of economics at the British Chambers of Commerce (BCC), said that, while expected, the interest rates rise would cause "considerable consternation" among households and businesses facing mounting cost pressures and soaring energy bills.“Although a quarter point rise may have a limited impact on most firms, many will view back-to-back rate hikes, and four Monetary Policy Committee members voting for a more significant rate rise, as a leap towards a sustained period of significant monetary tightening," he said.“The Bank of England is seeking to dampen an inflationary surge it has little control over. Higher interest rates will do little to limit the soaring energy costs and persistent supply chain disruption that are driving the current spike in inflation.“With the increase in Ofgem’s energy price cap from April set to push inflation to around 7%, despite government support, further interest rate rises are inevitable. However, raising rates too aggressively risks undermining confidence and lowering growth."Mr Thiru called for greater focus on the government’s Supply Chain Advisory Group and Industry Taskforce to work with industry to deliver practical solutions to ease the supply constraints that continue to drive the upward pressure on prices.“Action to limit the unprecedented surge in costs facing businesses, including financial support for those struggling with soaring energy bills, would help ease the pressure on firms to increase prices further," he said.Related reading from Relocate Global
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Institute of Directors: The Bank of England has "lost some credibility" among business leaders because of its overly cautious inflation projections
Kitty Ussher, chief economist of the Institute of Directors, said that business leaders were worried about inflation and, quite rightly, looked to the Bank of England to get it under control.But she added that the bank has lost some credibility among business leaders because of its overly cautious projections of inflation over the past few months and its failure accurately to interpret the labour market data.She added, "Today’s decision, therefore, needed to surprise on the upside to show markets and wider business leaders, that it was serious in doing the job it is there to do. It seems that 4 members of the nine-strong Monetary Policy Committee shared this view, and voted for a rise to 0.75%, but this group remained in the minority.“Therefore, because today’s decision was widely in line with market predictions, the jury is still out as to whether it was sufficiently dramatic to bring expectations of inflation down in the way that is needed to change behaviour and get a handle on the situation."Confederation of British Industry: important the Government "sets higher longer-term ambitions for the economy"
Alpesh Paleja, lead economist at the Confederation of British Industry (CBI), said the latest rise had come as no surprise and that the bank was likely to further tighten monetary policy in the near future because of mounting price pressures.“The resulting cost of living squeeze will hit the poorest households hardest, so it’s good to see the government taking steps to help the most vulnerable," he said.“But more broadly, it’s important that the Government sets higher longer-term ambitions for the economy, so that we break the current cycle of low underlying growth and higher taxes.”Read more news and views from David Sapsted.
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