MPC must reaffirm its commitment to supporting the recovery

11th July 2014

Commenting on today's Monetary Policy Committee (MPC) interest rate decision, David Kern, Chief Economist at the British Chambers of Commerce (BCC) said: -The MPC has made the right decision to keep interest rates and quantitative easing on hold.

However, repeated calls for early interest rate increases and inconsistent messages from the MPC are hampering the efforts of businesses to sustain the recovery. The MPC must make it clear that interest rate rises will only be considered when economic circumstances justify such a move. Higher interest rates may be required in the future, but such a move is totally unjustified at the present time. -Given the high level of underemployment that exists there is still spare capacity in the economy. Together with inflation below target and wages rising by less than 1% per year, there is no immediate need to increase interest rates. To sustain business confidence, the MPC must strive to deliver a more clear and consistent message on the future path of interest rates. The risks from raising rates prematurely are much greater than the risks of waiting a little longer.