Manufacturers welcome rate hold

Manufacturing News, Source : TheManufacturer.com
Published : 12 Sep 2007 9:04

The Bank of England's Monetary Policy Committee has kept the cost of borrowing unchanged at 5.75 per cent.

EEF, the manufacturers’ organisation, welcomed today’s decision to leave interest rates on hold and believes the Bank should continue to leave them at their present level for the foreseeable future.

Evidence from the labour market and factory gate prices suggests that there is no immediate inflation threat that requires further rate rises. EEF’s own survey released earlier this week showed a fall in the number of companies planning to raise prices. In addition, the uncertainty created by the turbulence in financial markets suggests that the Bank should wait for more evidence on its impact before making its next move.

Commenting, chief economist Stephen Radley said: "The UK economy continues to show that it can combine healthy growth with low inflation. We therefore believe that the Bank can keep rates where they are for some time."

The MPC released a statement with its decision emphasising that it had considered the effects that the recent credit crunch could have on the rate of inflation. Inflation currently stands at 1.9 per cent, which is below the target of 2.0 per cent.

The British Chambers of Commerce said that the MPC needs to go further than just keeping rates on hold. "Simply keeping rates on hold today is not enough, if the decision is interpreted as a mere short-lived postponement," said its economic adviser David Kern. "The MPC must acknowledge that further interest rate increases should now be off the agenda, at least for the time being."

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