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BCC: Worry that Familiarity Breeds Contempt When it Comes to Low Interest Rates

Looking ahead to so-called 'Super-Thursday', when the Bank of England will announce its decision on interest rates, its quarterly economic update - the Inflation Report - and the minutes of its last meeting, John Longworth, Director General of the British Chambers of Commerce said:

"As our economy shows encouraging signs of progress, some commentators are becoming louder in calling for an interest rate rise. I worry that familiarity has bred contempt when it comes to the importance of low rates in our current economic circumstances. Businesses see no convincing argument to raise interest rates at the moment. Indeed, doing so would be rash, premature and could potentially stifle growth.

"Let's take stock of the economic backdrop. The recovery is still in early days, export growth has stalled, sterling is strong and moves that strengthen it further would hit our manufacturers, there is great global uncertainty, and, at home, the government is embarking on the next round of cuts.

"In such a delicate and uncertain situation, it would be foolhardy to throw in another unnecessary variable. The prudent course of action is to keep rates low for the foreseeable future giving businesses confidence and certainty.

"At some point rates will have to rise and, when they do, it should be done slowly and steadily. But the moment to trigger the rate rise is not yet upon us."

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