Few cries of pain in the West Midlands greeted the Bank of England’s decision to leave its official interest rate at 5.0 per cent for a fourth month.
There was, indeed, a touch of relief that lingering fears that the Bank’s interest-setting monetary policy committee might raise the rate did not materialise.
Minutes of this week’s rate-setting meeting due on July 23 will attract unusual interest to see if the committee split three ways, with minorities voting for both a higher and a lower rate.
At Birmingham Chamber of Commerce and Industry, Katie Teasdale, senior policy adviser, said “There are sectors of the economy, such as property developers and retailers, that desperately need a boost and a rate increase would only have hindered them further.
“In that sense today’s decision is a brave one by the Bank and indicates that they are listening to business and taking seriously their responsibilities to put a stop to the economic slowdown.
“BCI would urge the Government to resist extra pay demands in the public sector. Business is concerned about the growing strike threat in the public sector, where a number of union leaders are seeking to re-negotiate recently agreed pay deals.”
Richard Brennan, chief executive at Birmingham First described the Bank’s no-change decision as “prudent and measured”.
He added “Clearly there have been pressured from all sides of the argument to lower or to raise the rate dependent on whether the concern centres on controlling inflation or measures to boost the flagging economy.”
David Waller, Midlands chairman of PricewaterhouseCoopers, said “Midlands businesses will have received today’s news with mixed emotions.
“While they will have welcomed the decision not to raise rates, something that up until recently seemed like a very real possibility given fears over rising inflation, they will be concerned that the committee may be unwilling to cut rates over the months to come.
Ultimately, many local businesses are better placed than most to ride out the turbulent market conditions, but some, particularly those in the construction and retail sectors, will feel that if the current economic slowdown continues to gather pace, interest rate cuts will be required in order to head off a full-blown recession.”
At the manufacturers’ organisation EEF West Midlands, Peter O’Grady accepted that the Bank is right to keep rates on hold for the moment as a slowing economy and moderate wage growth should keep a lid on inflation.
“However, he added, “if further gloom, descends and the economic slowdown gathers pace, the Bank need to be ready and willing to cut rates again.”
Peter Mathews, president of the Black County Chamber, pointed out that the present burst of inflation is fuelled by rising fuel, food and commodity price that no country can combat on its own.
“The MPC has found itself a bit stuck, whereby it is tasked with controlling inflation but cannot really do anything about it.”
Black Country business people would have preferred a rate cut of at least a quarter point to boost confidence and investment
Mr Mathews added “Manufacturers, retailer and construction firms, perhaps the three most important sectors in the local economy, are all under increasing pressures in the current economic climate and they will be looking for a cut before the end of the year to provide a much-needed shot in the arm”.