A NARROW majority of North East Shadow MPC members for a slight increase in interest rates for the first time in a very long time. Inflation was the driving factor behind the decision, with other members acknowledging that rises are looking inevitable in the near future.

The MPC is a partnership between The Northern Echo and Clive Owen LLP, which considers the state of the region’s economy and gives experts from a variety of sectors the opportunity to argue their case for a shift, or hold, in the rate.

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Nicola Bellerby, partner at Clive Owen LLP, said: “The pressures caused by inflation make the rise in interest rates more likely. The Chancellor has predicted inflation of four per cent throughout next year compared with a preferable rate of two per cent and we know we are faced with rising fuel prices and higher transport costs pushing up the price of food. A small rise in the interest rates before Christmas could slow inflation and may reduce the likelihood of higher increases next year.”

David Coates, managing director of Newsquest North East, said: “Inflation remains the biggest risk to economic stability and there is clear evidence now that price increases are hitting families which are seeing increased energy, transport and food costs. The Government expects inflation to top four per cent - but many, including me, expect it will exceed this level by the end of this year. It is time for a modest hardening of rates now, but slow and steady is the way to go.”

Chris McDonald, chief executive of Materials Processing Institute, said: “My vote this time round is for a rise in rates. With significant pressure on energy and materials and food costs creating pressure on wages, now is the time to indicate that rates are to rise.”

Ajay Jagota, chief executive of KIS Group, said: “I am still of the belief that inflation will prove transitory over the medium term and therefore I would hold interest rates. We need to get through the winter, with households under pressure with increased energy costs and increased tax not to mention nobody really knows if we will escape any Covid restrictions.”

Graham Robb, founder and senior partner at Recognition PR, said: “In the Budget, the Chancellor said inflation would average 4% next year. Its peak may very well be even higher. I think now is the time to bear down on inflation and would welcome a small increase in rates to help settle the economy.”

Christopher White, financial director of Darlington Building Society, said: “I’d vote for a rise to 0.25 per cent. The inflation figure may have dropped slightly this month but is still well above the BoE target of two per cent. Also, whilst the factors behind high inflation may or may not be temporary in nature, people are definitely feeling the impact of cost increases in supermarkets, petrol stations etc. I feel a small change in the bank base rate at this stage would be prudent to start the process of controlling inflation. I think further increases are then likely in 2022. Most mortgage customers are on fixed rate deals and therefore protected from rate increases. Furthermore, this increase, and potential future increases may lead to increases in the average rate paid to savers after a long period of low market rates.”

Nick Pope, managing director of Premier Tech Aqua, said: “At this stage of the economic recovery I would vote to hold, despite the significant uptick in inflation.

I think the drivers of inflation are temporary and unusual in their nature. To compound that with an interest rate rise now, when the recovery is driven by a re-stocking of the global supply chain, would be too early and could be damaging to consumer demand.”

Paul Gibson, director and chartered financial planner at Active Chartered Financial Planners, said: “There is talk of potentially raising interest rates now when we are still printing more money in the form of QE until the end of December. It’s like pressing the brake and the accelerator at the same time. The sensible thing to do would be to stop QE, then raise rates.

“I would leave rates as they are but stop QE. Digest where we are in the new normal. Raising rates could crash the housing (and other markets) whilst having little effect on the inflation wave that is washing over us.”

James Robson, chairman of Entrepreneurs Forum: “I think a small rate rise is coming very soon. I'm not voting for one at this meeting mainly due to the current uncertainty in the energy and steel prices. These are both significant factors in inflation and we should see some settling in these markets come the New Year.

“The cost of money is too low at the moment, and I think a rise in interest rates back to the two per cent or three per cent level in the next couple of years might be a positive thing.”

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