Interest rate decision is no reprieve, says KPMG
The Bank of England’s decision to hold interest rates at 0.5 per cent was "more like a stay of execution than a reprieve". That’s according to Ian Borley, regional chairman of KPMG in the East Midlands.
The business community has reacted with little surprise at the Bank of England's decision, as the borrowing rate has remained at the same level for almost two years.
But the CPI measure of inflation rose to 3.7 per cent n December - above the Bank's 2 per cent medium-term target - and there are fears from the Bank's own governor Mervyn King it could hit 5 per cent.
Borley said: “Today’s decision looks more like a stay of execution than a reprieve. With the fall in fourth-quarter GDP looking increasingly like a blip, and inflation set to rise further above target in the next few months, the case for a rate rise is strengthening – even if there are major uncertainties about how the economy will respond to the coming fiscal tightening.
"The MPC has made its decision for now, but will face the same dilemma again next month.”
The Bank of England's Monetary Policy Committee also voted to maintain the stock of asset purchases financed by central bank reserves at £200bn.
