Interest rate decision: Chamber reaction

The Bank of England has decided to maintain interest rates at 0.5per cent for a record 24 consecutive months.

Commenting on the decision, Dr Brian Sloan, Head of Business and Economic Policy at Greater Manchester Chamber of Commerce, said: “The Bank of England has once again held interest rates at 0.5 per cent to the relief of businesses and households, so having held them now for two whole years there is cause for a muted birthday celebration.

“Yesterday I warned that early indications from the Chamber’s Quarterly Economic Survey suggested that the region’s domestic economy had continued to slow during the first quarter of the year and there has been a worrying deterioration in confidence and intentions to invest.”

Dr Sloan continued: “We are all too aware of the dilemma facing the Bank of England’s rate setters, but now was not the time to raise interest rates and so today’s decision is very welcome by businesses.

“There has been a sharp rise in businesses reporting concerns over interest rates in this quarter’s survey, so this is likely to be a key issue behind the fall in confidence.

“However the case for a rate rise is gaining momentum, though the Bank is unlikely to make a move until May unless there is some very robust economic data, and at present that seems unlikely.”

Dr Sloan concluded:"Inevitably we must see interest rates rise to tackle inflation, but this inflation is being driven by overseas’ influences.

“The Bank’s dilemma is made worse by the fragile domestic economy and the risk to businesses and householders of increasing the interest rate.

“Should the Bank increase rates there is a solution - the financial institutions could choose to hold their own rates and absorb some or all of the increase for a period, though this does seem somewhat unlikely."