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Interest rate rise proves unpopular |
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Thursday, 10 May 2007 |
The Bank of England's Monetary Policy Committee has again raised interest rates, to 5.5 per cent, provoking a critical response in Scotland.
Representatives from Scottish sectors such as business and housing said
that the decision, the fourth interest rate rise in a relatively short
period, would have negative knock-on effects.
Scottish Chambers of Commerce executive director Liz Cameron said: "The
MPC strategy of raising interest rates to combat inflation is well
understood, and given the slippage to 3.1 per cent inflation
precipitating a Governor's letter of explanation, today's rise was
inevitable. We are concerned however as to how effective this policy is
proving to be.
"The steady rise in the rate over recent months has had no discernible
effect in curbing the inflation rate, however desirable that objective
may be. With observer comment suggesting up to fifty points rise in the
near future the negative impact of rate rises must be given serious
consideration. They cause instant rises in operating costs for
companies, amplifying the inflationary effects of fuel price rises over
the last year. They also add inflationary pressure to wage demands as
mortgage and other living costs rise for individuals.
"The last thing we want to see now is further pressure on our export
capability (especially in the manufacturing sector) with the pound
riding high against the dollar and such strong markets. It is also a
key time to show support for SMEs by restraining the cost basis for
enterprise. We hope the MPC will give weight to thee considerations
across the summer months."
The Scottish Trades Union Congress also said that the rise was a "blow to Scottish industry".
General Secretary Grahame Smith said: "The strong pound represents good
news for those flying off on shopping trips to the States but very bad
news for Scottish companies trying to export goods and services.
“The upward trend in interest rates is widely expected to continue with
another rise predicted as early as June. Rising interest rates are
seriously detrimental to the competitiveness of Scottish manufacturing
which currently provides 70 per cent of all Scottish exports.
“Therefore, it is vital that the new Scottish Executive does everything
in its power to support manufacturing industry. A good start would be
to increase the resources available to the Scottish Manufacturing
Advisory Service which is delivering real improvements in productivity
in workplaces across Scotland”.
Meanwhile, Shelter Scotland warned that the MPC's decision would push
more Scots towards poverty, as mortgage repayments for borrowers not on
fixed rate home loans would rise.
New figures released by the charity today showed that if a Scot earning
an average wage of £21,419 tried to buy an averagely priced house in
Scotland, at £143,045, they would be left with just £247 a month to
live on after paying basic households costs, i.e. mortgage, council
tax, and waste and water charges. This means only £247 to pay for
essentials like other bills, travel and food.
Archie Stoddart, director of Shelter Scotland, said: "These figures
give us a powerful indication of the immense pressure the cost of
housing is putting on the pockets of people who want to get onto the
property ladder.
"The interest rate rise is another blow to families who already have
overstretched their finances to keep a roof over their heads. Our
online repossession advice pages have been viewed almost 16,000 times
over the past six months. Last year 800 households applied as homeless
because of mortgage default - a figure which has been rising year on
year. This latest rise will mean that even more people risk following
them."
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Last Updated ( Thursday, 10 May 2007 )
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