Interest Rates

Interest Rates increased by 0.25 per cent on Thursday. ePolitix Stakeholders commented on this rise.

Stakeholder Response: Institute of Directors

Graeme Leach, chief economist at the Institute of Directors, said: "The Monetary Policy Committee's decision to raise interest rates by 0.25 per cent was driven by three considerations.

"First, concerns regarding the knock-on effects of house price increases (housing wealth) on household consumption.

"Second, concern that measured GDP growth doesn't reflect the real impact of the increases in public spending (because of the difficulty in measuring public sector output).

"Third, that inflation may be at a turning point as the output gap (spare capacity) disappears and the effects of higher oil prices ripple out across the economy."

Stakeholder Response: Construction Products Association

Allan Wilén, economics director at the Construction Products Association, said: "The Monetary Policy Committee is obviously concerned over the strength of consumer borrowing and house price inflation, which underlie its decision to raise interest rates. 

"However, the rate rise will add to the cost pressures faced by industry.

"Our recent Construction Industry Trade Surveys show that the construction products industry is facing significant cost pressures, in particular from higher raw material prices.

 

"Furthermore, the surveys found that the UK’s poor transport infrastructure and high fuel costs were undermining the benefits of industry investment in raising productivity and containing costs.

 

"Higher interest rates will add to these cost pressures and reduce UK firms’ competitiveness against overseas suppliers. 

 

"The Bank must tread with caution when considering any further rate rises.”

 

Stakeholder Response: Council of Mortgage Lenders

 

Michael Coogan, CML director general, said: "The Monetary Policy Committee members have recently made a point of emphasising that it is not in the business of 'clobbering consumers'.

 

"Equally, we all recognise that it needs to address inflationary pressures as it sees them.  So the rate rise is no surprise.

"We continue to think there will be further rate rises to come, and that consumers should organise their finances to be able to cope with them.

"But we do not expect that the housing market will still be regarded as a significant inflationary pressure looking ahead into 2005.

"Nor do we expect that there will be a significant worsening in arrears and possessions figures in 2005 with the benign economic backdrop."

Stakeholder Response: British Retail Consortium

Kevin Hawkins, director general of the British Retail Consortium said:"High Street prices fell to their lowest point this year last month, but yet again retailers and consumers have to cope with another rise in interest rates.

 

"Consumer confidence has weakened over recent months and when retail prices are falling it did not need another quarter per cent rise to tackle what increasingly looks like a paper tiger problem.

 

"The MPC should have adopted a wait-and-see attitude, assessing the impact of rate rises in previous months before making another unjustified and potentially dangerous move upwards."