Birmingham Chamber of Commerce and Industry yesterday called on the Bank of England to resist a knee-jerk interest rate increase in response to a sharp jump in inflation caused by rocketing utility bills.
But several City economists warned of the growing likelihood that the cost of borrowing will go up - possibly next month after National Statistics reported that inflation rose to 2.5 per cent during the year to June, a clear half-point above the Bank's official target.
In the markets, this changed expectation was reflected by a drop in short-term interest rate futures, while the pound shot up by a full cent against the dollar to $1.83.
"These figures are worry-ing, especially in the light of the volatility we are seeing in the Middle East and the potential upward effects on oil prices," said James Cooper, policy adviser at the Birmingham Chamber.
"However, we urge the Bank's Monetary Policy Committee not to make any rash decisions when it meets again in August."
Mr Cooper pointed out that rising inflation is always a worry for business and accepted that it would be "the natural move" for the MPC to raise its official rate from the present 4.5 per cent in an effort to bring price rises under control.
Against that, he pointed out that wage inflation remains subdued and that Britain's economic recovery is fragile.
"Chamber members tell us that their performance will be adversely affected by a rate hike," Mr Cooper added.
"The Committee should also consider the fact that consumers will have seen their disposable income fall as a result of higher utility bills and the rising cost of petrol.
"An interest rate rise may lead them to tighten the purse strings further and spend less on the high street, which would be a further blow to the UK economy." A similar point was made by HSBC economist John Butler, who described higher energy bills as "a tax on the consumer".
"They should only worry a central bank when they create second-round effects, i.e. consumers can demand higher wages," he said.
At present this looked unlikely.
Geoff Dicks an economist at the Royal Bank of Scotland was among those taking the opposite view, albeit tentatively.
He said: "August is by no means a done deal but if rates are to be raised between now and the end of the year there is a case for moving in August rather than delaying."
A similar call came from the CBI, where Ian McCafferty, c hief economic adviser, insisted that core inflation remains low and there are no signs of domestic inflationary pressures.
The impact of international energy prices should be temporary allowing Britain's inflation to fall back towards the Bank's two per cent target over the next 18 months.
"Any rise in interest rates at this stage is therefore unnecessary and, given the uncertainties surrounding the strength of consumer spending in the UK and the economic slowdown in the US, should be avoided, "Mr McCafferty added.
The cost of living as measured by the consumer prices index rose by 0.29 per cent between May and June, driving year-on-year inflation from 2.2 per cent to 2.5 per cent, its highest rate since the index was first kept in January, 1997, matched only once before, on September last year. It has risen from a benign 1.8 per cent as recently as March.
The more familiar retail prices index - the basis for most pay bargaining as well as the state pension and some other benefits - has risen still more sharply still to 3.3 per cent over the 12 months to June from three per cent in May and a steady 2.4 per cent throughout the early months of this year.
The turn for the worse is overwhelmingly due to utility bills, which have a phased effect on inflation as they reach households over a three-month cycle.
The RPI's measure of fuel and light has risen by 28.2 per cent, higher than in any month since February, 1981.
In the CPI, electricity and gas is lumped together with water and other housing costs - though ignoring council tax and mortgage interest alto-gether. This combination shows a 9.8 per cent increase over the latest 12 months, an all-time record.
Oil prices, the main force behind inflation for more than a year - and rising briskly again now driven by fears of a widening conflict in the Middle East crisis - were a modest restraining factor last month.
The price of crude was rising again yesterday, back above $76 a barrel.