THE BUSINESS VERDICT...

Chris Sutton, lead director at property consultancy JLL in Cardiff

“Increasing the base interest rate from 0.25% to 0.5% is a necessary step in monetary policy to begin the process of ending the era of cheap credit.

“JLL expects the base rate to rise slowly at around 0.5 percentage points per annum to a level of 2.25% by the end of 2022. To put this into perspective, the long-term average historic base rate in the UK is 5%, meaning the relative cost of borrowing in the UK should remain cheap by historic standards.

“However, any increase to the base rate will particularly hit home-owners and buy-to-let landlords with high loan-to-value variable or tracker mortgages. Although there has been a recent return to real wage growth across the country, household spending will need to be adjusted to ensure rising payments can be made.

“Rising rates may also make it slightly more difficult for first-time buyers to get on the ladder as the cost of borrowing increases. It is vitally important that we increase the delivery of new housing in the UK.”

Director of IoD Wales, Robert Lloyd Griffiths

“Rihanna’s ‘Umbrella’ was number one in the charts the last time the Bank increased interest rates, but while the decision may dampen the mood of business, it’s a shower, not a downpour, and there’s no need to be reaching for the brollies just yet.

“With firms facing rising costs and consumers experiencing limited real wage growth, the resultant higher borrowing costs from today’s rise will pinch a little. But more important now is the Bank’s plan for the future path of interest rates, which will affect household expectations and business planning. Today’s increase was widely anticipated from the Monetary Policy Committee’s recent communications, and so serves to preserve the central bank’s credibility.

“Further rates rises should be avoided in the near term, while the Chancellor must use this month’s Budget to ease cost burdens and to incentivise investment across the business community.”

President of the South and Mid Wales Chambers of Commerce Liz Maher

“Our preferred outcome was for a further period of monetary stability, with interest rates steady over the near term. The quarter-point rise may have little effect on most companies, but many will view this as the first step in a longer policy movement – not as a simple reversal of last year’s cut.

“These are challenging times for monetary policy-makers. The MPC had the unenviable task of weighing future risks to inflation, from a tight – and tightening – labour market, pass-through from a weaker pound and rising commodity prices. Against this, they needed to consider the future risks to undershooting the inflation target from weak growth, fragile business confidence, and the effects of uncertainty.

“These are finely balanced judgements. While interest rates will need to return to historic averages at some point, it should be done slowly and with reference to the ever-changing economic context.

“With the Bank of England’s latest forecasts of sluggish growth for the next few years, the government must use the upcoming Autumn Budget to boost business confidence and investment, and reduce the pressure on prices from other policy decisions.”