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SMEs reassured interest rates will remain low as inflation falls to target

POSTED: 9th January 2014
IN: Industry news
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News that the Consumer Prices Index fell to 2 per cent in December has brought reassurance to small businesses, this week, suggesting interest rates are likely to remain low for the near future.

News that the Consumer Prices Index fell to 2 per cent in December has brought reassurance to small businesses, this week, suggesting interest rates are likely to remain low for the near future.

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The announcement from the Office for National Statistics represents the first time the CPI has returned to government's target rate of inflation since November 2009, leading Prime Minister David Cameron to comment;

"It's welcome news that inflation is down and on target. As the economy grows and jobs are created this means more security for hard-working people.

"Falling rates have been attributed to a slower rate of growth in food prices in particular, as supermarkets offered heavy discounts in the run up to Christmas.Despite the seasonal nature of this effect, Markit chief economist Chris Williamson predicts the trend will continue, with inflation remaining close to target.

"The easing in price pressures is a welcome relief to policy makers at the Bank of England and helps keep the spectre of higher interest rates at bay," Williamson reflected, implying interest rates are unlikely to rise in coming months.

This position has been echoed by Bank of England governor Mark Carney, who maintains that the current 0.5 per cent rate will be held at least until employment drops to 7 per cent, with the option to extend this horizon further if inflation is on track.

For the small business community, this decision creates a more stable outlook for 2014, and may give business owners the confidence to seek funding in order to grow their operations.

With access to finance still a major challenge for many British SMEs though, Aldermore believes it is more important than ever to boost lending to small businesses, enabling them to contribute to the building momentum of the economic recovery. 

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