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Bank warned against ‘hasty’ rate rise


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."

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