The Monetary Policy Committee voted to raise interest rates today by 0.25 percentage points on 2nd August 2018, increasing the Bank of England base rate to 0.75%, the highest level since March 2009. Responding to the rise, Liz Cameron, Chief Executive and Director, Scottish Chambers of Commerce said:
“It is disappointing the Bank of England has opted to increase interest rates in the absence of conclusive evidence that now is the right time to do so for the UK economy.
“The unanimous decision of the Monetary Policy Committee comes at a time when inflation has been falling towards target, and much of the current pressures holding it at current levels are driven by external factors, such as the value of sterling and energy prices.
“The Bank of England must tread carefully when it comes to further changes in interest rates at the ‘gradual pace’ they outline. Whilst businesses continue to trade, despite challenging political uncertainty, it is critical continued investment is made to plug skills gaps in the workforce and improve digital and physical infrastructure. Recent labour market data illustrated that pay rises are only just managing to outpace inflation, so this increase is likely to do little to encourage consumer confidence among the millions of Britons with variable rate mortgages. It is also unlikely that this change will provide much benefit to savers, or any lasting boost to the value of the pound, with currency markets much more concerned about further clarity in the Brexit negotiations.
“Future changes in the base rate must be conducted with a keen eye on the economic data and sentiment of businesses and consumers across the UK. There is no appetite for interest rates to return to pre-crisis levels amongst business or consumers, and the Bank of England must carefully consider what the ‘new normal’ should be for both the pace and level of interest rate rises.”