LONDON, Nov 6 - Following are reactions from business groups and economists to the Bank of England's decision on Thursday to raise its key repo rate by 25 basis points to 3.75 percent:
DAVID FROST, DIRECTOR GENERAL, BRITISH CHAMBERS OF COMMERCE "This decision is acceptable when it is viewed as a reversal of July's precautionary cut of 0.25 points, which took place at a time of greater uncertainty about the economy's health. "However, this initial rate rise should not turn into a trend of rising interest rates. There are glimmers of hope for the manufacturing sector, output grew in August, and several private surveys report an upswing. "However, our Quarterly Economic Survey suggests there is still a long way to go before we can talk of a broad-based recovery in manufacturing. If this initial increase in rates leads to a succession of further rises it will endanger the upturn in the manufacturing sector recovery, which has been such a long time coming."
GRAEME LEACH, CHIEF ECONOMIST, INSTITUTE OF DIRECTORS "The Bank of England has finally run out of patience with UK consumers. Having waited patiently for UK households to bring their borrowing under control, it has finally decided to intervene. "The price of doing nothing was deemed to be too great. With the ripple effect of stronger house prices extending north across the country, continued rapid growth in mortgage equity withdrawal seemed inevitable."
STEPHEN RADLEY, CHIEF ECONOMIST, ENGINEERING EMPLOYERS FEDERATION "Whilst we understand the Bank's motives, manufacturers will feel that the rise has come too early for them. With UK rates well above our competitors, higher rates risk higher exchange rates, particularly against the dollar. Manufacturers will hope that this is not the beginning of a trend of increases which could force the patient into relapse."//