Bank warned against ‘hasty’ rate rise
08/07/2014
The Bank of England has been warned against increasing interest rates in the short term by the British Chambers of Commerce (BCC).
The Bank of England governor, Mark Carney, has recently stated that interest rates could be increased “sooner than markets currently expect”.
However, a quarterly survey by the BCC has raised concerns that this could result in “more limited growth ambitions” from companies who do not have “healthy cash piles”.
The survey analysed over 7,000 businesses and revealed that over the course of April and June, some industries experienced reduced growth.
Industries which appeared to have suffered included exports and investments, however despite this, both industries remained above their pre-recession levels.
Additionally, the service sector, which is the biggest single part of the UK economy experienced similar reductions in growth, as the index that measures the industry fell from its all time high in the first quarter of 2014.
This slow in growth from certain industries was “unsurprising” according to the BCC, as they claimed that the economy had “jolted forward” in the first quarter of 2014.
More limited growth ambitions
John Longworth, director general of the BCC said that whilst the economic recovery was moving forward, repairs to the finance system should be made a “top priority”, rather than looking to increase interest rates.
He continued to say: "By driving up the cost of credit for fast-growing firms, many of whom do not sit on the same healthy cash piles as their more established counterparts, early rate rises may mean more limited growth ambitions among the very firms we are counting on to drive the recovery."
Need financial advice?
If you need to ask a financial question then please contact our financial advisers online or over the phone to get help with your query.
Share this..
Related stories
Alistair Darling admits sterling is in freefall
Earlier this week we had the Bank of England suggesting that the UK economy was sluggish at best and still in a consolidation period at worst. Then we saw Alistair Darling commenting upon the UK budget deficit and national debt, a subject which has for some time been one that was ignored by the Labour Party. However, today Alistair Darling has readily admitted that the UK government does not have...
Read MoreHas the US economy turned the corner?
There was a sudden reduction in the U.S. trade deficit published today with the announcement of a $32.9 billion deficit for October against a "downwardly revised" figure of $35.7 billion for September. The main kicker for the improvement in the trading environment seems to have been a rise in exports, helped by the weak dollar, although the very fact US businesses seem to be experiencing an improv...
Read MoreBank of England split in latest MPC vote
Minutes from the last MPC meeting have indicated a three-way split between members with the vast majority voting in favour of no change, one member voting for a rise in interest rates and one member voting for a reintroduction of quantitative easing. This perfectly illustrates the very difficult situation which the Bank of England and the MPC face with the UK economy which is as difficult to predi...
Read MorePolitical parties come together to fight the crisis
While the headlines may make interesting reading with the Tories criticising the Government, the Lib Dems criticising everyone and a general look and feel of conflict within politics, the reality at this moment in time is very much different. Thankfully, unlike in the US, it seems as though party politics will take second place to the task of ensuring the UK economy is protected with all parties...
Read MoreECB May Raise Interest Rates In The Short Term
While the Bank of England confirmed what the majority of observers had forecast, no change in the UK base rate, it seems that the ECB may have different plans. As the City was digesting the no change announcement by the Bank of England the ECB were talking about the increased threat of inflation and a possible rise in European interest rates over the short to medium term.
Even thou...