Businesses in the West Midlands are urging the Bank of England to keep interest rates on hold today .
Their plea comes after the Bank’s monetary policy committee (MPC) cut interest rates six months in a row to the current 0.5 per cent, a level not reached before in the Bank of England’s 315-year history.
Birmingham Chamber of Commerce and Industry (BCI) says that the radical measures implemented last month need sufficient time to work through the economic and financial system.
Chamber policy adviser Will Rogers said: “It is clear that money supply is top of the Bank of England’s agenda and this will be reflected in Thursday’s expected decision to retain interest rates at 0.5 per cent.
“We expect monetary policy to be firmly focused on quantitative easing, owing to the fact that the lack of availability of credit remains a primary concern throughout businesses in the region.
“The Bank has already injected £75?billion into the economy, and though the situation remains very serious, reducing the rates further would have a negative impact on the banks’ profitability and could lead them to restrict lending, which at this time, needs to be avoided.”
IHS Global Insight economics commentator Howard Archer said base rate could stay at the current 0.5 per cent level “well into 2010”, at which point the economy should have stabilised and being showing signs of recovery.
Taking rates below half a point would harm the banks’ margins, further hit savers and would be unlikely to be passed on in full to borrowers. He said the lack of availability of credit currently remains a major handicap to recovery.