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BCC: Premature Interest Rate Increase Could Derail the Recovery

Commenting on today’s interest rate decision announced by the BoE MPC, David Kern, Chief Economist at the British Chambers of Commerce, said:

“Today’s decision to keep interest rates and the level of QE on hold was expected and was the correct decision, given the current international economic uncertainty.

“It is also reassuring that only one member of the committee has, as last time, voted in favour of an immediate increase in rates.

“Although earnings are edging up gradually, labour costs are not rising at a pace that should cause concern in the near future. Inflation is also likely to remain below the 2% official target until well into 2017.

“The recovery, although on course, is facing headwinds - the UK’s strong labour market has suffered a setback in the second quarter and the trade and manufacturing figures published by the ONS yesterday were disappointing.

“When major international organisations such as the World Bank and the IMF have warned against putting up interest rates it would be premature and risky for the UK to consider such a step, and the MPC must hold fire and should not consider rate increases until well into 2016.”

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