Member Article

North East responds to rate hold

Bank of England policymakers have decided to keep UK interest rates unchanged at 5.5%. Observers said the Bank faced a tough decision, having to balance signs of a slowdown in consumer spending against growing inflationary pressures.

The decision was seen as a missed opportunity by business groups and financial analysts in the North East.

Richard Bottomley, vice-president of the North East Chamber of Commerce, said: “The Bank has missed a tremendous opportunity to inject renewed confidence into the business community at the start of the New Year. There is a great deal of uncertainty in the UK economy and the Bank had the chance to take a proactive step to address this.

“However, NECC does appreciate that this was a difficult decision to make with incredible inflationary pressures at play particularly with soaring oil and food prices. Pressure will continue to mount on the MPC to cut rates in February.”

Paul Woolston, senior partner at PricewaterhouseCoopers LLP, Newcastle said: “We understand the dilemmas that faced the Monetary Policy Committee. After cutting rates in December, the committee’s natural inclination was probably to wait until at least next month. Therefore a decision to wait wasn’t surprising, but in our view it was the wrong one.

“Given the immediate challenges facing the economy, the risks of waiting are greater than the risks of acting early. By deciding not to cut interest rates the committee has increased the risk that emergency measures will be needed later in the year.”

Alan Hall, EEF Northern Director, said: “The evidence from the past month points to a growing risk of a weaker economy and there is little reason to believe the case for a cut will be any less strong next month. The Bank has missed an ideal opportunity to head off the pervading economic gloom which has enveloped the UK at the start of the year.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .