Bank of England must keep its nerve
11 January 2011
Midland business leaders are urging the Monetary Policy Committee (MPC) to keep its nerve this week and hold interest rates at the historic low of 0.5 per cent.
Christine Braddock, President of Birmingham Chamber of Commerce and Industry said until the government gets a clear steer at how the private sector is starting 2011, current interest rates should be retained.
She said: "Question marks still remain over the Midlands economy despite the Chamber's recent QES survey which showed record high sales and full order books in the final quarter of 2010 in the service sector. However 26 per cent of businesses in the service sector cited business rates or corporate taxation as a hindrance to business growth. In the manufacturing sector, this figure is 23 per cent.
"There is no doubt that interest rates will have to rise at some point in 2011, particularly with rising inflation, due to surging prices for a range of commodities and the increase in VAT rates to 20 per cent.
"The government will have to juggle the rise in inflation, currently at 3 per cent for the ninth month, against tightening fiscal policy. We cannot underestimate the challenges which lie ahead."