BCC warns over interest rate rises

The British Chambers of Commerce (BCC) has raised concerns that an interest rate rise could have a major impact on UK households.

Early interest rate rises could present a “huge risk” to the economy, with the recent improvements in the UK due to strong consumer spending and mortgages – meaning an increase in the base rate could have a significant impact.

The BCC recently revised its growth forecast for 2014 to three per cent from 3.2 per cent and for 2015 to 2.6 per cent down from 2.8 per cent.

“Downgrades to our growth forecast are a warning sign that we still face a number of hurdles to securing a balanced and sustainable recovery,” said BCC director general John Longworth.

The body also highlighted factors such as the weak eurozone economy and continued political uncertainty in Ukraine and the Middle East, which are influencing the confidence of the markets.

Interest rate rises have been at a record-low since 2009 and the majority of the Monetary Policy Committee have continued to vote against any rate rises.

However, the BCC is forecasting the first interest rise in five years during the third quarter of next year. The first rate rise could be to 0.75 per cent, with the base rate eventually rising to 1.75 per cent by the end of 2016.

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