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Business groups have broadly welcomed the Bank of England’s decision not to raise interest rates from a record low of 0.5 per cent.

David Kern, chief economist at the British Chambers of Commerce, says the decision by the Bank’s Monetary Policy Committee (MPC) will help businesses weather difficult trading conditions.

Adds Kern, ‘Until the recovery is more secure later in the year, interest rates should be kept at current levels. A premature increase could have an adverse affect on growth and jobs, particularly in the services sector.’

The MPC has been under pressure from some quarters to raise rates in order to combat rising inflation, which is currently at 4 per cent, twice the target rate.

In February, three of the MPC’s nine members voted to raise the interest rate.

The chief economic adviser to the Confederation of British Industry, Ian McCafferty, says the MPC’s decision to leave the rate low is ‘no surprise’. However, he adds that inflationary pressures are increasing.

McCafferty comments, ‘The short-term data continue to cloud the issue, but there are growing risks of inflation becoming more ingrained as firms attempt to bolster their profit margins and employees seek higher wage rises in the face of sharply increased costs of energy and commodities.’

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