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BCC: Signs of economic slowdown reinforce argument against rate rises

Commenting on today’s Monetary Policy Committee (MPC) interest rate decision David Kern, Chief Economist at the British Chambers of Commerce (BCC) said:

“The MPC made the right decision in keeping interest rates and quantitative easing on hold. We have argued for some time that an early interest rate increase would be unjustified, particularly now that wage pressures are low and inflation is below target. This has only been reinforced by emerging signs that economic growth is slowing, as our new Quarterly Economic Survey shows a decline in both manufacturing and export balances.

“In addition the latest update to global forecasts published by the International Monetary Fund (IMF) earlier this week shows downward revisions to growth for the euro zone and for China. Given the uncertain situation, both domestically and internationally, it would be wrong to take unnecessary risks with the recovery. Instead the MPC must maintain business confidence by providing reassurance that interest rates will not rise until there is a clear reason for doing so. 

“The market expects an increase in interest rates in the first quarter of next year, but given recent developments there are strong arguments for waiting until later in the year.”

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