Business leaders in Greater Birmingham said the government must hold its nerve following today’s announcement that the UK's inflation rate climbed to its joint highest level in more than five years in August.
Higher petrol and air fare prices contributed as inflation, measured by the Consumer Prices Index, rose to 2.9 per cent in August, up from 2.6 per cent in July, figures show.
The bigger-than-expected rise came ahead of the Bank of England's next announcement on interest rates on Thursday. However, economists said the Bank was still highly unlikely to raise rates at the meeting.
Paul Faulkner (pictured), chief executive of Greater Birmingham Chambers of Commerce, said: ““The rate of inflation saw a noticeable increase over the summer, with the figure for August matching the four-year high that was recorded in May as higher petrol and air fare prices contributed to the latest rise.
“Also, the recovery of the Eurozone economy played a part as this made imports from Europe more costly.
“Stagnant wage growth and higher inflation are continuing to put a squeeze on living standards and now is the time for the government to hold their nerve and ensure the foundations are in place to ride out the economic uncertaint.
“Nevertheless, in light of today’s result, it was reassuring to see the value of the pound hit a year-long high. It remains to be seen whether the financial markets are right in predicting that the Bank of England will now have to raise interest rates to offset this uncertainty.
“From a local perspective, we have just finished the surveying for our Q3 Quarterly Business Report and concerns around interest rates were more apparent as compared to last quarter. We will be analysing these results along with wider trends across the regional economy at our next Quarterly Business Report Launch event in November.”
