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North East accepts Bank decision

Bank of England policymakers have decided to keep interest rates at 5% despite mounting pressure for back-to-back cuts. The move was greeted with reluctant acceptance in the North East, where regional commentators recognised the bank’s difficult position.

Richard Bottomley, president of the North East Chamber of Commerce, said: “The Bank has had to handle conflicting issues - cut rates to maintain strength in the economy, or freeze them to keep a handle on inflation. It has clearly decided that, at this point, keeping a lid on inflation is the key priority. However, it seems inevitable that a cut be made in the very near future. “The latest Purchasing Managers’ Index for manufacturers has shown firms are battling record highs for price inflation, but other reports suggest that they are struggling to pass these costs on. The housing sector is also facing difficult times at present.

“Perhaps the greatest pressure on businesses looking to grow at present is the availability of finance which has either dried up or is only available at high interest rates. The Bank has made efforts with its recent £50bn injection of liquidity to encourage lenders to free up finance but this is taking its time to trickle through to the market place.”

Alan Hall, EEF Northern Regional Director, said: “The economy has been through a series of shocks since the credit crisis hit last summer and the Bank has been right so far in responding with a measured approach on rates. However, despite concerns on inflation, further cuts to interest rates are needed to prevent the economy from drifting towards recession.”

Sarah Green, Regional Director of CBI North East, said: “The latest data shows the economy is slowing, albeit only gradually, and at the same time inflationary pressures continue to mount. So, the Bank faced a difficult decision, but it is no surprise that rates were kept on hold this month. “While the housing market and linked activities are very weak, activity elsewhere is slowing, but is well short of recession. Meanwhile, energy and raw material prices continue to climb, meaning inflationary pressures are intensifying as producers are forced to pass these on.”

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