BCC warns Bank of England off interest rate hike

The British Chambers of Commerce (BCC) has urged the Bank of England to keep interest rates on hold until August.

The warning comes as increasing numbers of analysts predict that the Bank's interest rate setting Monetary Policy Committee (MPC) will raise the basic cost of borrowing in May or June.

But the BCC feels confidence among manufacturers and service sector firms is currently slipping, and putting a freeze on interest rates is the only way to stop it.

Its latest survey found that domestic sales had fallen to their lowest level since mid-2003.

The BCC's director-general, David Frost said: "The clamour for early interest rate increases is unjustified and potentially dangerous, particularly for manufacturing.

"Higher interest rates would depress the already very weak growth in consumer spending, and may damage the housing market. The MPC should not consider interest rate increases until August at the earliest."

Mr Frost said the BCC findings underline its prediction that the economy will expand less than Gordon Brown would like this year.

Following five quick-fire increases in interest rates, the Bank of England has held the cost of borrowing at 4.75 per cent since August.

However, calls are increasing for rates to rise, with increasing numbers of the MPC voting for rates to be increased to a three-and-a-half-year high of five per cent.

The Bank will announce its latest decision on interest rates on March 9.