The Bank of England’s decision to hold interest rates at 0.5 per cent will help sustain signs of recovery in the West Midlands, business leaders said.
Michael Ward, president of Birmingham Chamber of Commerce, said: “Although inflation remains above the 2 per cent target, at 3.5 per cent, the decision by the Bank’s Monetary Policy Committee will be welcomed by businesses in the Greater Birmingham area.
“Interest rates have been at 0.5 per cent since March 2009 and have played a key role in nurturing the tentative signs of growth reported in the British Chambers of Commerce Quarterly Economic Survey.
“The current low interest rate is vital in nurturing the fragile shoots of recovery from the region’s businesses.”
Mr Ward added that the Bank of England has faced pressure from some quarters to raise interest rates to counter the inflationary pressures but as they are predominantly from external sources such as the increase in commodity prices this would be relatively ineffective.
He added: “Britain’s exposure to the Euro-zone economies, which the markets are jittery about in the light of recent European elections, and potential reduction in commitment to austerity measures, reinforces the need for continuity and stability in the UK’s monetary policy.
“The government’s austerity measures – spending cuts and tax rises – mean that unemployment is likely to remain high and there will be spare capacity in the economy.
“Any concern over inflation should, therefore, be secondary to the need to keep business conditions conducive to growth.”
Mike Ashton, spokesman for the West Midlands Chambers of Commerce, said: “The British Chambers of Commerce’s Quarterly Economic Survey has given us some good indicators that some sectors are starting to recover, despite the overall economy hovering at a standstill or tipping into a technical recession. Wage growth remains low which means that there is low underlying inflation.
“It is essential that the Bank of England’s focus remains on keeping interest rates low in order to maximise the ability of business and industry to invest and expand.
“Any rise in interest rates would hit businesses attempting to borrow and would reduce householders’ disposable income by pushing up mortgage repayment rates.
“There is clearly no room for complacency and the focus on pro-growth and pro-business measures must be the Bank of England’s priority.”
