SCOTTISH Chambers of Commerce has declared the Bank of England is right to keep UK base rates at a historic low "for the time being", after the Monetary Policy Committee stood pat again.
Liz Cameron, chief executive of Scottish Chambers, highlighted continuing uncertainty over the sustainability of the UK economic recovery, emphasising the need for increases in business investment and productivity.
The Bank announced at noon yesterday that the MPC had, at its meeting on June 3, voted to hold base rates at their record low of 0.5 per cent and maintain the scale of its stimulatory quantitative easing programme at £375 billion.
Base rates have been at 0.5 per cent since March 2009. Many economists are predicting the first rise in rates from their record low will not come until next year.
UK economic growth slowed sharply in the first quarter of this year, to just 0.3 per cent. This was only half of the already below-trend pace of expansion of 0.6 per cent in the fourth quarter of 2014.
Commenting on the latest MPC decision, Ms Cameron said: "In its quarterly inflation report last month, the Bank of England signalled that interest rates were unlikely to rise until well into 2016, so this month's announcement comes as no surprise.
"Though factors such as the partial recovery in oil prices over the course of this year are likely to provide upward pressure on inflation as the year goes on, underlying low inflation and the fragility of the economic recovery mean that the Bank is right to keep interest rates at its historic low for the time being."
She added: "Though low inflation and the rise in real wage levels are prolonging the ability of consumer demand to drive economic growth, signs of increased business investment and productivity growth are still in their infancy, meaning that there is some way to go still before we can say that the recovery we are experiencing is truly sustainable."
Howard Archer, chief UK economist at consultancy IHS Global Insight, said: "The Bank of England was always a nailed-on certainty to keep interest rates at 0.5 per cent at the June meeting of its Monetary Policy Committee. Indeed, the odds currently strongly favour the Bank of England sitting tight on interest rates and on the stock of quantitative easing over the rest of 2015."
He added: "We expect there to have been a nine-zero vote within the MPC in favour of unchanged interest rates at the June meeting, but it is not inconceivable that [MPC members] Martin Weale and Ian McCafferty switched back to favouring a small hike to 0.75 per cent.
"However, we doubt that any other MPC member is currently on the brink of voting for an interest-rate hike."
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