Prices rising, but CBI pleads for pegged rates

The Confederation of British Industry yesterday urged the Chancellor of the Exchequer not to raise interest rates again, even though its latest survey showed manufacturers' costs and prices rising at their fastest rate since 1991 and expected to accelerate further.

The CBI's quarterly survey will weigh heavily on the minds of the Chancellor and the Governor of the Bank of England when they meet to discuss interest rates next week.

They will also discuss the Bank's latest inflation forecast, due next Tuesday, which will reflect the fact that recovery has slowed in the third quarter but is still exceeding its long-term trend. Some City economists said the meeting could agree an immediate rise in rates.

The survey showed manufacturers' costs being pushed higher by raw material prices, but companies increasingly finding themselves able to pass cost increases on to customers.

The number of firms planning to invest in new capital equipment rose to a five-year high as the number working at full capacity climbed further above its long-term average.

But the CBI maintained that the survey results 'do bode well for future inflationary pressures', arguing that a rise in the number of firms reporting price increases was normal for the time of year. Andrew Buxton, chairman of the CBI's economic affairs committee, said there was a risk of another interest rate rise but added: 'We don't think the facts are there to justify the risk.'

CBI economists said they were particularly encouraged by the strength of export orders and the fact that manufacturers were planning the biggest increase in investment for six years. Business optimism is also improving faster.

The survey prompted little reaction from the financial markets, with interest rate forecasts becoming only slightly more pessimistic in the short-sterling futures market.

The FT-SE index closed off its lows, down 28.2 at 3,000.9. The dollar dropped to a post- war low against the yen and a two-year low against the mark.

View from City Road, this page

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

Greece says 'No': A night of huge celebrations in Athens as voters decisively back Tsipras and his anti-austerity stance in historic referendum

Greece referendum

Greeks say 'No' to austerity and plunge Europe into crisis
Ten years after the 7/7 terror attacks, is Britain an altered state?

7/7 bombings anniversary

Ten years after the terror attacks, is Britain an altered state?
Beautiful evening dresses are some of the loveliest Donatella has created

Versace haute couture review

Beautiful evening dresses are some of the loveliest Donatella has ever created
No hope and no jobs, so Gaza's young risk their lives, climb the fence and run for it

No hope and no jobs in Gaza

So the young risk their lives and run for it
Fashion apps: Retailers roll together shopping and social networking for mobile customers

Fashion apps

Retailers roll together shopping and social networking for mobile customers
The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate