Cautious approach on interest rates continues – Chamber

The decision to hold interest rates at 5 per cent demonstrates the Bank of England’s cautious and gradual approach, business leaders said today.

However, the Bank has raised hopes of further cuts in November, with governor Andrew Bailey stating rates are “now gradually on the path down.”

Yesterday’s decision to hold interest rates, which was widely expected, follows a cut from 5.25 per cent in August - the first reduction since the onset of the pandemic in 2020.

Emily Stubbs (pictured), head of policy at Greater Birmingham Chambers of Commerce, said: “While it was widely anticipated that the Monetary Policy Committee would hold interest rates at 5 per cent, many Greater Birmingham businesses will be disappointed by yesterday’s decision. 

“The Bank has been clear that it will continue to take a cautious and gradual approach to cutting rates, and though overall inflation has been easing, the latest data from the ONS shows stubborn price pressures in core inflation and the services sector in particular.

“At a local level, our Quarterly Business Report surveying indicates that inflation and interest rates remain a top concern for many businesses, with labour costs, utilities costs and other overheads the main sources of pressure to raise prices.

“Over the past year, borrowing costs have risen to unsustainable levels for many SMEs - particularly those left vulnerable by Brexit and Covid-19 - and this has directly contributed to subdued investment intentions. 

“Last month's rate cut gave many struggling businesses welcome breathing space, and commentators suggest that a further interest rate cut may be on the cards for the end of the year.

“However, interest rate cuts must also be accompanied by fiscal measures to turn the dial on investment and growth.

“While appreciative of the fiscal backdrop the Government is facing, many will be closely watching the Autumn Budget for such measures.”