The Bank of England has held interest rates at 5%, fuelling more fears from businesses that the economy could be on the brink of recession.
Experts said the Monitary Policy Committee (MPC) voted to hold interest rates after it was predicted a cut could lead to a further rise in interest rates, expected to top 4.5% by the end of the year.
However, a business lobby group said small businesses who are struggling to cope with high fuel prices and tightening credit lines desperately need a cut in rates.
David Kern, economic adviser to the British Chambers of Commerce (BCC) said while the group welcomed the MPC’s decision not to raise rates, it must do something to ease the impact of the economic downturn on small firms.
“The economy urgently needs an interest rate cut to counter threats of recession,” he said. “The MPC cannot ignore the dangerous effects of rising insolvencies, falling house prices, and worsening pressures on the banking system.
“With UK inflation expected to increase in the next few months, the MPC may not be able to cut rates immediately. But as soon as inflation peaks later in the autumn, it must start cutting interest rates without delay.”
© Crimson Business Ltd. 2008