BCC warns against interest rate rise

<p>The BCC has stated a premature interest rise could present a “huge risk” to the British economy.</p>

The British Chambers of Commerce (BCC) has warned against a premature rise of UK interest rates.

Interest rates have remained at a historic low of 0.5 per cent since 2009, but there has been speculation that they could rise in the coming months. Earlier in the month, the Bank of England announced that rates would remain unchanged but there was a split in the Monetary Policy Committee (MPC) for the time since July 2011.

Members Ian McCafferty and Martin Weale voted in favour of a 0.25 per cent rise to 0.75 per cent but were subsequently outvoted. However, the Bank's governor Mark Carney hinted that there could a change in rates towards the end of 2014 or into next year. There are suggestions that an alteration could come in the build-up to the May 2015 general election.

The BCC downgraded its forecast for UK gross domestic product (GDP) growth from 3.2 per cent to three per cent for the remainder of the year. There were further drops for both 2015 and 2016 with the BCC reporting 2.6 per cent and 2.4 per cent respectively. It described these changes as being an "ominous warning sign".

John Longworth, director general of the BCC, said: "Downgrades to our growth forecast are a warning sign that we still face a number of hurdles before securing a balanced and sustainable recovery. A number of headwinds from the global economy are also having a real impact on British businesses."

While a slight increase in interest rates is expected in the third quarter of 2015, the BCC expects this to rise even further, reaching 1.75 per cent by the end of 2016. Despite the organisation downgrading its estimates for the coming years, 2014 will still represent the fast rate of growth for seven years in the UK.

Find up to date information on the FTSE 100 and spread betting strategies at City Index

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.