CBI: Bank of England should not raise interest rates

27 October 2004
Following a significant fall in UK manufacturers' confidence, the CBI has urged the Bank of England not to further increase interest rates.

Homeowners have suffered as the Bank has increased the cost of borrowing five times in the last 12 months, to see many pay more on their mortgages.

And now the CBI's quarterly survey has shown slowing growth in the manufacturing sector.

Consequently, as commodity prices rise, profit margins tighten. Job cuts and a drop in expected growth in the coming year look inevitable.

Chief economic adviser at the CBI, Ian McCafferty, said: "Taking into account everything else we know about the economy as well, we urge the Bank of England to keep interest rates on hold for the foreseeable future."

The CBI's survey discovered that only 17 per cent of businesses feel confident about the future. On top of this 27 per cent were genuinely pessimistic about the three months leading up to October.

The CBI expects production to hold its position until the new year, but new orders are expected to grow at a much slower pace.

Interest rates have risen five times since November 2003 and currently stand at a three-year high of 4.75 per cent.

The Bank is set to decide next week whether to increase the rate of borrowing in November or not.

Any further increases could see anyone without a fixed rate or capped mortgage paying more each month.

To find out how to change to a fixed or capped rate mortgage, click here.
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