CBI predict interest rates rise in summer
Feb 5 2010 by Jez Davison, Evening Gazette
THE CBI in the North-east predicted that interest rates would creep up around the middle of the year following the Bank of England’s decision yesterday to leave them unchanged at 0.5%.
The CBI said the Bank would have to consider returning monetary conditions towards more normal levels as the economy recovered.
Sarah Green, regional director, CBI North East, said: We would expect this to lead to a small rise in interest rates around the middle of this year. The economy is stabilising but still faces some serious headwinds, and recovery remains shallow-rooted.
However, near-zero interest rates, the existing £200bn quantitative easing package and the sharp fall in sterling are already extremely expansionary, and inflation has exceeded expectations consistently in recent months.
The North East Chamber of Commerce (NECC) warned against premature hikes in interest rates or excessive new taxes on businesses or consumers.
President of the organisation, Martyn Pellew, said: While it is encouraging that the MPC has taken the UK economy off the life-support machine, it is far too early to move it out of intensive care just yet.
There are still concerns about the health of the labour market, while lack of access to finance is still a fundamental issue for many businesses.
