Business leaders in the West Midlands fear a rise in interest rates is on the way after inflation increased to four per cent.
Bank of England policymakers have insisted the stubbornly-high cost of living is due to temporary price shocks, such as soaring global commodity prices and the VAT rise last month, and that inflation will drop back by 2012.
But as inflation continues to soar, hitting four per cent in January, business leaders say the dogged approach is sure to come to an end.
Birmingham Chamber of Commerce Group policy adviser Will Rogers said: “The business community is suffering. The fall in the pound and the rise in VAT have both played their part in the rise of inflation. So interest rates will have to rise too.
“But raising interest rates at a time when fiscal policy is being tightened will heighten the pressures facing business even more.
“If the recovery is not to be put at risk, then the government needs to defer putting up interest rates until at least the end of this year.”
Weighing up the threat of inflation with weak economic growth, analysts expect an interest rate hike as early as May.
However, Mike Dell, president of Black Country Chamber of Commerce, said he hoped rates would remain low.
He added: “I think the rise in inflation was to be expected; the rising costs in fuel, increased VAT in the retail and leisure industries and an increase in energy prices have all resulted in a widely excepted rise.
"With the net inflow into the UK of manufactured goods and foodstuffs there is inevitably an upward pressure on costs in all sectors. It will take time for inflation to stabilise and slow to the two per cent target in the future.
“To this end, we need to remain cautious; the UK economy needs to grow steadily. I hope that the interest rates will remain on hold or at the very least very low for most of this year.
“The Bank of England should be very careful to not overreact to the figures and use it as an excuse to put up interest rates, as this could clearly hinder recovery.”
