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MPC must acknowledge likely rate rise

Commenting on today’s interest rate decision, announced by the Bank of England’s Monetary Policy Committee, David Kern, Chief Economist at the British Chambers of Commerce (BCC) said:

“The decision to hold interest rates and QE was expected and correct. However, as the pace of economic growth strengthens, it is becoming clear that the first rise in official interest rates is likely to occur well before the Committee’s 2016 prediction, due to the earlier than anticipated fall in unemployment. The MPC must use next week’s Inflation Report to move towards a more realistic timetable for its forward guidance, to maintain business confidence and keep its credibility.

“The Committee must continue to combine forward guidance with a firm commitment to bringing down inflation. Additional QE must not be contemplated in current circumstances. The MPC must also place more emphasis on measures that will improve the flow of finance to SMEs and growing businesses. This means replacing some of the gilts in the Bank of England’s balance sheet with private sector assets such as securitized SME loans. ”