Interest Rates

EEF, the manufacturers’ organisation has urged the Bank of England to move cautiously this week, and in the coming months, by not raising interest rates more sharply than is necessary.

Whilst accepting the rationale for the probable rise this week, EEF believes the Bank should ignore premature calls in some quarters for stronger action now, and in the immediate future, following the recent rise in inflation.

It believes that with the effects of a strong currency yet to be fully felt and, the Bank’s own forecasts suggesting a sharp drop in inflation as last year's rise in energy prices fall out of the index, the MPC must proceed cautiously in the coming months.

Commenting, EEF Chief Economist, Steve Radley said:

“Industry accepts that a rate rise this week is necessary to control inflation and to anchor expectations around the 2% target. However, it is premature to be talking about stronger medicine at this stage when the effects of previous rises are still working their way through.

“Given the strength of the currency and the prospects for inflation falling sharply in the coming months, companies will be looking to the Bank to move with caution.”