The British Independent Retailers Association has commented on today’s double blow of the interest rate rise just a day after inflation rates also soared.
The announcement from the Bank of England that interest rates will be raised by 0.25%, taking the base rate to 4.25% is the 11th rise since December 2021.
This week inflation rates hit 10.4%, which has meant prices have been driven high. BIRA has said this second blow is putting strain on the already struggling high street and independent business owners.
Andrew Goodacre, ceo, commented: “Another interest rates increase will further dampen consumer demand, at a time when we need to see the economy grow. Increasing interest rates to reduce inflation works when the inflation is demand driven. This time around, higher prices have been driven by energy and supply chain pressures. Higher wages/salaries will not drive inflation as they are needed to pay for higher energy and borrowing costs.
“It’s disappointing to see that the Bank of England has made this decision at a time when retailers and consumers need certainty.
“Although inflation increased slightly last month, we have to accept that high inflation is currently due to high energy, high production costs and supply chain pressures. Against these factors, higher interest rates are a blunt instrument and will simply suffocate economic growth.
“We also had the Office of Budget Responsibility (OBR) forecast of inflation at 2.9% by the end of the year so I think the Bank of England could have held the rates when they are, safe in the knowledge that inflation will reduce when the current reduced cost of energy is passed on to the businesses and consumers.”
