Commenting on today’s interest rate decision, Suren Thiru, Head of Economics, at the British Chambers of Commerce (BCC), said:
“While expected, the decision to raise interest rates will cause considerable consternation among households and businesses given the mounting cost pressures and soaring energy bills many are facing.
“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.
“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.
“There should be a greater focus on 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.”