11 January 2008, 19:00 PM
  • Yesterday's vote by the Bank of England's Monetary Policy Committee (MPC) to hold the interest rate at 5.5% has been criticised by the British Retail Consortium (BRC), which it believes will put more pressure on customer-facing businesses.

BRC director general, Kevin Hawkins, says, “This decision makes the need for a cut next month all the more pressing. The worst Christmas sales growth for three years shows consumers and retailers are still feeling the effects of five previous rate rises as other bills continue to shoot up. While appreciating the decision was finely balanced, given the inflationary pressures facing the economy, 2008 is going to be tough for all customer-facing businesses. The longer the Bank delays cutting rates again, the greater the risk of the economy heading in the wrong direction.”

David Kern, economic adviser at the British Chambers of Commerce, also agrees not lowering the interest rate was a failed opportunity. He says, “The decision is disappointing but not surprising. The MPC missed an important opportunity to underpin confidence and limit the damage to the economy. A modest interest rate cut would have alleviated the threats to the banking system and would have helped restore the smooth flow of credit in the economy. Sterling’s recent weakness poses inflationary risks, but delaying unduly a modest and much-needed interest rate cut could worsen the downturn in the economy, triggering bigger and more dangerous falls in the pound. To minimise the threats, we strongly urge the MPC to cut interest rates in February.”

The MPC reduced the interest rate from 5.75% to 5.5% last December.