MPC must persevere with low interest rates, says British Chambers of Commerce
05/06/10 | 22:00
Commenting on the choices facing the Monetary Policy Committee at its June meeting next Thursday, David Kern, Chief Economist at the British Chambers of Commerce, said:
“In view of the dangers still facing the economy, the MPC must persevere with expansionary policies. Any thought of raising interest rates will merely heighten the risk of a major setback, and must be rejected until the recovery is more secure.
"Despite some welcome signs of improvement in the economy, growth remains modest and fragile, and businesses still face serious obstacles. The threat of a double-dip recession is particularly acute at this early stage of the upturn, and the precarious eurozone situation, alongside upheavals in global financial markets, increase risks to the UK.
“The MPC will only be able to maintain low interest rates for a prolonged period if the Chancellor presents a credible medium-term plan for tackling the UK’s deficit in this month’s Budget. Putting the country’s public finances on a sound footing will reduce threats to our credit rating and to inflationary expectations, and it will help create the stable background businesses need to drive recovery.”
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Media Contact:
Sam Turvey
Tel: 020 7654 5813
Email: s.turvey@britishchambers.org.uk
Notes to Editors:
Unlike the OECD, which has called on the Bank of England to sharply increase interest rates next year to mitigate the risks of higher inflation, the BCC is urging the Monetary Policy Committee to keep rates low for a prolonged period.
The BCC’s June Economic Forecast expects the MPC to hold interest rates at 0.5% until November 2010. Thereafter, it predicts modest increases to 1% before the end of 2010, and to 2.50% by the end of 2011. The Quantitative Easing programme is likely to be maintained at £200 billion for the remainder of 2010 and will then be scaled down gradually during 2011.
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