Pictured above: Ross Gurdin
Putting up interest rates will not solve the problems of
inflation and will hurt exporters who have been buoyed by low
interest rates say business leaders in response to the Bank of
England Monetary Policy's Committee's expected announcement on
interest rates this Thursday 7 April.
Birmingham Chamber of Commerce Group (BCCG) says the soaring
price of oil and higher than expected rises in heating costs as
well as the higher costs of cotton, leather and other basic
commodities due to weather problems is the cause of a rise in
inflation.
Ross Gurdin, policy advisor at BCCG said: "The Bank of England
expects inflation to come down to around 2 per cent sometime next
year anyway, as temporary inflationary pressures begin to abate, so
to increase interest rates now could damage the recovery and offer
limited impact on inflation.
Businesses are already coping with a level of food price
volatility which we haven't seen since the oil crisis of 40 years
ago due to droughts in Russia, China and Brazil and the flooding in
Pakistan and Australia.
"Many experts believe commodity prices such as oil and key foods
such as wheat and sugar could continue rising which could push
inflation up to 5 per cent in the short term. Some oil analysts
believe the price of a barrel of oil could exceed the record high
of $147 set in 2008 if the turmoil in the Middle East continues and
demand from emerging Asian economies keep growing.
"To raise interest rates now could damage the resurgence in
exports, particularly for manufacturers. The pound has devalued by
around 25 per cent since the recession which means that British
goods are cheaper in foreign markets so demand for luxury and high
quality goods have continued to grow."