Manufacturers cautious on interest rate rise
Manufacturers have expressed caution over the Bank of England’s decision to increase interest rates to their highest levels in almost a decade.
The Bank’s Monetary Policy Committee opted to raise rates by 0.25% to 0.75% – the highest it has been since March 2009 when the rate was slashed by bolster the economy in the wake of the recession.
Steve Farrow, managing director of Made in the Midlands member, Pilz Automation, said: “The levels of debt can’t be sustained so the Bank had to do something to cool things down.
“Everyone in the industry is very cautious at the moment because of uncertainty over Brexit but manufacturers especially need to have a stable economy and hopefully this will help to achieve that, although it would be good to see the banks lending more because the industry needs investment in order to grow.”
The Bank said that since May’s Inflation Report, the near-term outlook had evolved broadly in line with the MPC’s expectations.
It said recent data appeared to confirm that the dip in output to 0.2% in the first quarter was temporary, with momentum recovering in the second quarter to 0.4% and then beyond into the second half.
It added that the labour market had continued to tighten and unit labour cost growth had firmed.
“Although modest by historical standards, the projected pace of GDP growth over the forecast is slightly faster than the diminished rate of supply growth, which averages around 1½% per year,” said the Bank.
“The MPC continues to judge that the UK economy currently has a very limited degree of slack. Unemployment is low and is projected to fall a little further. In the MPC’s central projection, therefore, a small margin of excess demand emerges by late 2019 and builds thereafter, feeding through into higher growth in domestic costs than has been seen over recent years.”