"British business welcomes today's
MPC's decision to leave interest rates unchanged. It was clearly the
correct decision. In spite of the growing clamour for early interest
rate increases, there are no powerful arguments for an immediate
change in rates.
"At the same time, we are very
concerned by the more hawkish tone signalled by recent MPC comments,
and by the sharp turnaround in MPC sentiment since December, even
though the fundamental economic circumstances have not changed. We
strongly urge the MPC to persevere with a cautious stance.
"Average earnings growth rose modestly
in recent months, but pay settlements remain modest. Growth in
consumer spending slowed sharply in Q4 2004, to only 0.4 per cent,
while retail sales stagnated in recent months. House prices fell in
Q4, and mortgage approvals are declining. CPI inflation is up
slightly, but remains below target, and has been consistently below 2
per cent in recent years. Manufacturing is still facing very difficult
"Given the underlying risks facing the
business sector in general and manufacturing in particular, we urge
the MPC to keep interest rates on hold for the time being, and reject
calls for early increases."