News Column

Business leaders warn against rushing to raise interest rates

July 8, 2014

By Hugo Duncan, Daily Mail, London

July 08--A 'hasty' rise in interest rates would hurt fast-growing companies and put the economic recovery at risk, according to business leaders.

The Bank of England is widely expected to leave rates unchanged this week having held them at an all-time low of 0.5pc since in March 2009.

But governor Mark Carney has warned that a rate rise is on the way with many observers expecting a hike later this year or early next year. Such a move would be welcomed by savers but it would also push up borrowing costs for millions of households and businesses around the country.

The British Chambers of Commerce said 18pc of manufacturers and 22pc of services firms are concerned about higher interest rates and urged the Bank 'not to act prematurely'.

Director-general John Longworth, pictured, said: 'These results reinforce the case against the Bank of England making any hasty decisions on raising interest rates in the very short-term.

'Early rate rises may mean more limited growth ambitions among the very firms we are counting on to drive the recovery.'

Carney has promised that increases will be 'gradual' and 'limited' with rates rising to around 2.5pc over the next three years, half the average of 5pc seen before the financial crisis.

But critics warn that if the Bank waits too long before raising rates it will have to act far more aggressively than planned to keep a lid on inflation and stop the economy overheating.

Rob Wood, chief UK economist at Berenberg Bank, said: 'The looming issue is how to keep rate hikes only gradual. The Bank should start sooner rather than later.'

The BCC estimated that the economy grew by 0.8pc in the second quarter of the year with business activity stabilising following an 'unexpected surge' at the start of the year.


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Source: Daily Mail (London, England)

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