West Midlands businesses hail decision to hold interest

Business leaders in the region have appluaded the Monetary Policy Committee’s decision to hold interest rates at 0.5 per cent despite inflationary pressures.

Rate-setters on the MPC also left their £200 billion programme to pump money into the economy unchanged following their two-day meeting.

The decision comes after the first policy split on the MPC since November was seen last month when Andrew Sentance voted to hike rates to tackle inflation, currently above the Bank’s 2 per cent target at 3.4 per cent.

But fellow committee members have warned it is too early to act, with the recovery still uncertain and Chancellor George Osborne’s savage Budget squeeze to slash the deficit likely to slow the economy.

Simon Topman, Chairman of West Midlands Chambers of Commerce, said: “It’s vital now for the Bank of England to continue to hold their nerve, particularly now that the Coalition Government has set out how it intends to deal with the debt crisis.”

Ronnie Bowker, Ernst & Young’s senior partner in Birmingham, said: “Although inflation remains higher than the Bank of England’s target, some of the pressures which have brought this about – most notably rising oil prices and the weakness of sterling – have eased in recent weeks.

“Before any more MPC hawks take to the air, the committee should hold steady and evaluate the full extent of public sector cuts on the UK economy.”

Mark Smith, regional chairman at PricewaterhouseCoopers in the Midlands, added: “While concerns over inflation are mounting in some quarters, there is still an overwhelming sense that it is premature to raise rates.

"Policymakers are concerned about unsettling economic growth and will want to assess the impact of the austerity measures announced in last month’s emergency budget before adjusting policy.

"This should make for some interesting debate at coming committee meetings, though we’re still unlikely to see rates move off their current historic lows in the short term.”

Mike Dell, President of Black Country Chamber of Commerce said: “It is imperative that the Monetary Policy Committee takes the views of small business into consideration and do not increase interest rates before the end of 2010; an increase in rates could hinder our chances of a sustainable recovery.”

Business leaders in Coventry and Warwickshire also felt the Bank of England’s decision to keep interest rates at 0.5 per cent was ‘the right choice’.

Louise Bennett, the chief executive of the Coventry and Warwickshire Chamber of Commerce, said keeping a low rate was essential in helping the economy to recover.

She said: “The Bank of England has made the right choice by holding interest rates because although inflation is above two per cent, increasing the rate at this time would stifle the recovery.

“The Chamber of Commerce has been strongly urging the Bank to maintain this course and we hope this continues in the near future.

“A low rate is key to facilitating growth and we applaud the Bank for taking the right decision.”