BCC urges MPC not to jump the gun on interest rate rises

24th June 2014

Commenting on the governor of the Bank of England Mark Carney's speech regarding potential future interest rate rises, Dr Adam Marshall, BCC's Executive Director of Policy and External Affairs said: "While Mark Carney is right to say that the 'timing of Britain's first interest rate rise is less important than the path thereafter', we would urge the Monetary Policy Committee not to jump the gun.

"Earlier than expected rate rises could mean that current levels of growth are 'as good as it gets' for the UK economy. The case for acting more swiftly has not yet been made. If the housing market is the principal concern, there are other tools at the Bank of England's disposal to cool the market. "If we are to see continued business investment growth, following the abysmal levels seen over far too many years, companies need to be confident that they will be working in a low interest rate environment, facing only gradual rather than sudden change." David Kern, Chief Economist at the BCC, added: "The European Central Bank's recent move to a negative deposit rate has reinforced the upward pressure on sterling, which is making our exports more expensive. Mr Carney's comments yesterday may add to these unwelcome trends. UK inflation is still below target, and earnings growth is below inflation. Global growth forecasts have been revised down recently, and the UK recovery is still facing obstacles. It is therefore premature to consider early interest rate increases."