Inflation to prevent interest rate cuts for SMEs
Dec 20 2007
Rising inflation will only affect UK SMEs if it hampers the Bank of England's willingness to lower interest rates, claims an industry body.
The Confederation of British Industry has said while inflation is expected to 'creep up over the course of next year', and 'above-target inflation' is to run through the course of 2008, this would not affect British business directly.
Lai Wha Co, principal economist for the CBI, says: 'The only reason that this would be of concern to business is that with inflationary pressure in the economy, at a time when the economy is slowing, the Bank has to make a difficult decision about interest rates.'
She adds that if inflation was to rise more markedly than the market forecast then the Bank's members may be constrained.
The cuts in interest rates that some SMEs were hoping for may not be delivered, Co concludes.
The CBI has predicted that inflation will rise during 2008 due to the higher price of oil, gas and food.
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