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Fall in Inflation Will East Pressure on Interest Rates

Posted: 19th July 2017

Scottish Chambers of Commerce believe that June’s fall in CPI inflation from 2.9% to 2.6% will ease pressure for an early increase in interest rates.

Liz Cameron, Chief Executive of Scottish Chambers of Commerce, said:

“June’s fall in inflation is significant, although much of the downward pressure came from a fall in fuel prices this year compared to an increase at the same time last year. Staples such as food and household goods continue to increase and expectation remain that inflation will continue to rise above the target rate of 2% for some time to come.

“Nonetheless, it should ease some of the growing pressure from the Bank of England’s Monetary Policy Committee for an early rise in interest rates. The Bank took decisive action to lower rates to rock bottom following last year’s EU referendum result, and businesses welcome the stimulus that this has brought to the economy. Interest rates will eventually have to go back up again, but the risks to our economy of doing so at a time of fragile growth are substantial.

“Next month’s Bank of England Inflation Report will be eagerly awaited in terms of how these latest figures will factor in to future prospects, with inflation expected to peak at or around 3% before falling back. A steady hand on interest rates coupled with determined government action to mitigate business costs will be key to medium term economic prospects.”

Business Comment

Business Comment is the Edinburgh Chamber of Commerce’s bi-monthly magazine. It provides insight on Edinburgh’s vibrant business community, with features on the city’s key sectors, interviews with leading figures and news on new business developments in the capital.
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