Clamour for higher interest rates will be damaging for the economy

Commenting on recent developments in the outlook for interest rates, David Kern, Economic Adviser to the British Chambers of Commerce, said:

"The mood of the financial markets has changed dramatically over the past week and the futures market is now signalling a number of increases in interest rates before the end of the year. We believe this clamour for higher rates is totally unjustified and potentially very damaging for the economy.

"We appreciate that the MPC is facing a dilemma. There are signs that inflationary expectations are edging up and it is likely that the CPI inflation figure, due to be published next week, will trigger a letter from the Governor to the Chancellor. Against this background, we accept that the MPC cannot consider immediate interest rate cuts in spite of the worsening prospects for growth.

"However, it is important to avoid monetary overkill. The risks to growth are still greater than the threats to inflation. While the MPC is required to bring inflation back to its 2% target, its remit gives it latitude to do so in a fashion which does not damage the economy in the face of external shocks. We urge the MPC to maintain a cautious stance and reject any demands for immediate interest rate increases."

Ends

Media Contacts:

Fiona Cunningham
Tel: 020 7654 5812
Email: f.cunningham@britishchambers.org.uk

OR

Sam Turvey
Tel: 020 7654 5813
Email: s.turvey@britishchambers.org.uk

Notes to Editors:

The British Chambers of Commerce (BCC) is the National Voice of Local Business.
The BCC sits at the heart of a powerful nationwide network of Accredited Chambers of Commerce serving business across the UK, which employ over five million people.