Business support vital after interest rate rise - Chamber

The Bank of England has raised interest rates for the first time since 2018 in response to calls to tackle surging inflation.

The Monetary Policy Committee voted to raise rates from the historic low of 0.1 per cent to 0.25 per cent, agreeing that surging inflation needed to be tackled despite economic risks posed by the new Omicron variant

The rate rise comes as the Omicron variant triggers a collapse in consumer confidence and leads to a wave of cancellations for hospitality businesses during the key festive trading period

The interest rate increase will result in higher monthly mortgage payments for homeowners with loans linked to the Bank rate

Britain is the first major economy to announce a rate increase since the start of the pandemic, leading to the pound to rise by around one cent against the US dollar to just under $1.34

Raj Kandola, head of policy at Greater Birmingham Chamber of Commerce said:

“It was unsurprising to see the Monetary Policy Committee vote to increase interest rates given that inflation hit a new ten-year high this month.

“The additional restrictions introduced by Government in the last week are likely to have influenced the MPC 's outlook - essentially assuming that less money will be spent on in-person activity and that a greater emphasis on buying goods which will have a knock-on impact on rising prices. Early analysis from our latest Quarterly Business Report seems to reflect that sentiment, as a number of firms expressed concerns around the impact of interest rates and the ongoing pressure they face to increase prices.

“It remains to be seen whether this inflationary pressure proves to be transitory in the long term; however, the short-term picture is much clearer. Given the Bank of England has moved to tighten monetary policy, the emphasis is squarely on the shoulders of the Treasury to loosen fiscal policy and provide businesses with the financial support they need to get through the next few months. ”

Register for our upcoming Quarterly Business Report launch event to understand local businesses ' thoughts on the current economic climate and to join our discussion on innovation in Greater Birmingham.