MPC should provide clarity and consistency in its interest rate messages

24th June 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 decision to keep interest rates and quantitative easing on hold was the right one.

However, efforts to support the recovery are being hampered by repeated calls for early interest rate rises. Inconsistencies between Governor Carney's reassuring remarks and other comments from the MPC are undermining. To sustain business confidence, the MPC must strive to communicate clear and consistent messages. -With annual CPI inflation below target, the MPC can afford to wait before tightening their policy. The strong rise in sterling over the past year, making UK exports more expensive, is an important reason for not raising interest rates prematurely. At a time when other central banks, such as the ECB, are considering easing policy, an early UK move could increase the pressure on our exporters. The MPC must also reassure businesses that when rates start rising, increases will be modest and gradual, to avoid any unwelcome surprises.

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