Mounting speculation that the Monetary Policy Committee (MPC) of the Bank of England will tomorrow raise interest rates has prompted Birmingham Chamber of Commerce and Industry (BCI) to put out a 'don't panic' plea.
James Cooper, policy adviser at BCI said: "Business in Birmingham will be hoping that the Bank of England does not react rashly to the current economic climate by raising interest rates for August from the present 4.5 per cent.
"The MPC will be concerned about the rate of inflation, which is currently running at 2.5 per cent, the joint highest level since 1997 and half a percentage point above the Government's target.
"This is due to the current cost of energy, with high petrol and utility costs pushing prices up across the board. Business shares the Bank's concerns about inflation and the detrimental effects it can have on the economy.
"But despite these worrying figures, we urge the MPC to look at the bigger UK economic picture. There still appears to be spare capacity in the economy and wage demands remain subdued, which suggests that the UK is not in the grip of an inflationary cycle at the moment.
"UK plc is now performing relatively well in relation to this time last year, with year on year GDP growth registering at 2.6 per cent in July, the highest level since 2004.
"However, the recovery is still fragile - much of the growth achieved during the second quarter of this year was a result of the World Cup, which saw an upsurge in activity on the high street. The pound has also strengthened recently, contrary to the Bank of England's expectations, which is bad news for UK exporters.
"UK unemployment also rose between May and June, with the unadjusted seasonal claimant count rising to 3.5 per cent. In Birmingham, the equivalent figure fell 0.1 per cent to 9.1 per cent, remaining relatively high."
"As a result, BCI feels that the time is not right for a rate rise."
Harvey Williams, RICS West Midlands spokesperson, also said: "While the West Midlands has been basking in glorious sunshine during the recent heatwave, the increasing debate on when, not if, we will see the first rise in interest rates come could cast a shadow over business and industry in the region.
"RICS can report that the housing market is relatively buoyant in the region with moderate price rises but it is not following the mini-boom we have seen in London and the South-East. If the MPC does take a harder line on rates this month, it could point towards a tougher housing market into 2007.
"RICS believes this month's MPC decision will be the closest call in 2006 but we would stress it should not make a knee-jerk reaction to inflationary pressure and hold fire on increasing the base rate at least in the immediate future. The last thing we need at the moment is for a rate rise lightning bolt to strike at the heart of West Midlands business and industry. Mervyn King's team is now at full strength - let's hope they are all pulling in the right direction."