THE North East business community was last night split over the Monetary Policy Committee’s – MPC – decision not to raise interest rates.

One regional engineering boss says it’s time to raise interest rates to nullify the spectre of high inflation and the long-term damage it could inflict on the region’s economy.

But the president of the of the North East Chamber of Commerce – NECC, Martyn Pellew, believes the MPC has made the right decision.

Interest rates were kept at their record low yesterday after Bank of England policymakers resisted pressure to curb rising inflation.

The no-change decision, which means the Bank’s base rate has been at 0.5% for 25 months, comes amid further signs that the UK’s economic recovery is still not strong enough to withstand the shock of higher borrowing costs.

Meanwhile, the European Central Bank hiked interest rates for the first time in nearly three years yesterday increasing its base rate to 1.25% from its record low of 1%, its first rise since July 2008, as it seeks to combat inflation.

At 2.6% inflation in the eurozone is only marginally above its 2% target but economists said the ECB has taken a hard-line over fears the rising cost of oil and commodity prices could lead to higher wage demands, forcing the bloc into a vicious circle.

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