Manufacturers welcome interest rate freeze

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Manufacturing News, Source : TheManufacturer.com
Published : 08 Mar 2007 14:58
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Manufacturers today welcomed the Bank of England’s decision to keep interest rates on hold at 5.25 per cent but were warned that a hike was still on the horizon.

Responding to the Bank’s Monetary Policy Committee (MPC) decision, UK manufacturing industry leader for Deloitte, Jane Lodge, said: "Following another steady performance in the last quarter, today's decision will be welcomed by UK manufacturers. However, large industrial companies, many of whom either manufacture in or buy from Chinese manufacturers, could be affected in the longer term by the recent stock market turmoil. Combined with the expectation of a future interest-rate rise and challenging currency fluctuations, there are still concerns across the industry about the impact of any cooling in the Chinese economy."

The manufacturers' organisation EEF said it believed the case for a further rate rise was yet to be made.

EEF, welcomed today's decision to leave interest rates on hold, believing that amidst a range of mixed data the case for a further rise is far from made. EEF believes that two of the Bank's stated fears, an escalation of earnings growth and firms pushing through significant price increases, have yet to materialise in any substantive fashion. EEF chief economist Steve Radley, said the MPC was clearly divided as to what the current smoke signals mean for the direction of inflation. “With fears of escalating wage rises overblown and limited signs of cost increases being passed on to the final customer, the case for a further rise has yet to be made," he said.

Deloitte economic adviser Roger Bootle believed the decision to leave interest rates unchanged represents only a short reprieve. “Rates are still likely to rise again - perhaps as soon as next month. And there remains a chance that they will eventually have to rise above 5.5 per cent,” he said.