By Claire West
Commenting on the Monetary Policy Committee (MPC) minutes published today by the Bank of England, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:
“These minutes confirm widespread expectations that one member of the committee continued to support a rise in interest rates. We believe such a move would be misguided given the tough fiscal measures announced in the Budget. Raising interest rates too soon would further increase the risks of a double-dip recession.
“We support the majority decision to maintain the current approach, and we believe the need for increasing the size of the quantitative easing programme may have to be considered if the economy weakens.
“The minutes state that short-term growth prospects for the economy have weakened, while short-term inflationary risks are greater than previously indicated. This is an unfortunate combination of circumstances that makes the choices facing the MPC more difficult. Nonetheless, despite the temporary hike in inflation, weaker growth prospects would bear down on inflation in the longer-term and strengthen the case against the MPC overreacting. With wage pressures remaining weak, people’s purchasing power is being squeezed and the situation must not be worsened by raising interest rates.”