The Bank of England is playing a dangerous game on rate rise, according to the Institute of Directors
The eight to one vote by the Bank of England's monetary policy committee (MPC) to keep interest rates at the historic low of 0.5 per cent is a dangerous game, according to the Institute of Directors (IoD).
The IoD warned the Bank's decision carries "its own risks".
In a particularly dovish November Inflation Report, the rate-setters indicated rates may not rise until 2017.
Read more: No rate rise until 2017 a possibility
“Caution won out again at the Bank of England today, with the MPC spooked by a worsening outlook for global growth," said James Sproule, chief economist of the IoD.
"But, with strong consumer confidence and wages on the up, the arguments against raising interest rates from the current exceptionally low level are falling away."
In a media briefing following the publishing of the MPC's rate decision, the minutes and the November Inflation Report, governor Mark Carney said there was a clear trade-off between "domestic strength and foreign weakness", but reiterated it is not the time for a rate rise.
Read more: Bank of England lowers UK growth outlook
Carney added: "When the rate does rise, it will rise gradually. Very gradually."
However, Sproule continued:
Our concerns go beyond the need for normalisation, as there is genuine apprehension over asset prices, the misallocation of capital and consumer debt. Borrowing is comfortably below the unsustainable pre-crisis levels, but with debt once against rising there is a need for vigilance.
The UK is all too familiar with consumer debt getting out of control. Without gradual rate rises to dampen debt-fuelled exuberance, borrowing poses a risk to future economic growth and stability.
However, Carney added at the press conference the goal is to raise interest rates to meet the inflation target sustainability, and not increase the rate too quickly.
The MPC also lowered its UK growth outlook to 2.7 per cent from 2.8 per cent today.