A PETERBOROUGH business leader has today urged Bank of England bosses to ignore rising inflation and to cut interest rates to help companies beat the credit crunch.
Chief executive of the Peterborough Chamber of Commerce John Bridge says yesterday’s 0.5 per cent hike in inflation to three per cent – the highest rise in six years – is just a temporary blip.
Most experts say the bank’s Monetary Policy Commit
tee is unlikely to cut interest rates, which currently stand at five per cent, for fear of driving inflation even higher.
But Mr Bridge said: “There are other key factors in the economy that need to be considered.
“If we want businesses to go on investing then we have to give them the incentive to do that – and that means cutting interest rates.
“We have seen inflation rise before only to fall again shortly afterwards.
“I think this new rise is just a temporary blip.”
He added: “But the Bank of England needs to put inflation to one side and understand the reality of the real financial situation facing businesses.”
Figures released by the Office for National Statistics show that, last month, the Consumer Prices Index (CPI) rose by 0.5 per cent to three per cent on the back of rising gas and electricity bills, food prices, and Budget tax hikes on alcohol and tobacco.
The figure is higher than the 2.6 per cent level many experts had expected inflation to reach and brings the Bank of England’s governor Mervyn King to the brink of writing a second open letter to the Chancellor to explain the rise in inflation.
The bank is charged with keeping inflation within a one per cent range of its two per cent target, but Mr King must write a letter if CPI hits 3.1 per cent, as it did in March 2007.
The full article contains 318 words and appears in Peterborough ET newspaper.
