Rate rise was not needed now says BRC Chief
The interest rate rise, announced by the Bank of England, is premature and likely to be unhelpful to consumer confidence over the next few months.
The Bank of England has raised interest rates by a quarter of a percent to five per cent raising household costs in the process. The increase will hit retail hard as the cost of mortgages and credit card debts for millions of consumers will rise, dampening consumer spending during the vital Christmas trading period.
The bank said in a statement that inflation could rise further above its target in the near term but then fall back as the price of energy and imported goods abates. “Against that background, the committee judged that an increase in Bank Rate of 0.25 percentage points to 5.0% was necessary to bring CPI inflation back to the target in the medium term,” the Bank said.
The BoE is concerned that inflation will stay above target because of strong economic growth, a buoyant stock market and rising house prices.Figures released today from the Halifax Building Society showed that house prices rose by 1.7 per cent in October, following rises of 1.2 per cent in September and 1.3 per cent in August.
British Retail Consortium Director General Kevin Hawkins said “A rise was not needed now. With retailers reporting year-on-year inflation of only 1.5 per cent and price competition intense, it’s clear inflationary pressure is not coming from the high street. “Ironically, the only significant source of pay inflation is last month’s six per cent rise in the National Minimum Wage. “The Treasury, City and independent economists are forecasting Consumer Price Index inflation of only two per cent for 2007. “The Bank should have waited until early next year to see the full impact of August’s rate rise. “By piling another rise on top the Bank has made it more likely economic activity will be depressed over the next six months.”
