The Agricultural Industries Confederation (AIC) has warned the Bank of England not to 'lock in' inflation, as interest rates were hiked today for 13th time in a row.
AIC, the UK's leading trade association for agri-supply businesses, has today (22 June) voiced concerns of businesses in the agricultural supply industry.
It comes as the base rate was raised from 4.5 percent to 5 percent - a 15-year high -amid growing fears of a recession.
AIC has written to the Governor of the Bank of England, Andrew Bailey, warning him that the Bank is "starting to lock in inflation to the economy, in contradiction with its objective that inflation be controlled to 2%".
It comes as the UK agricultural sector grapples with supply-led inflation, which is adding pressure to agricultural and food businesses' production costs.
This ultimately hits consumers with higher food bills and contributes to the wider cost-of-living crisis.
In the letter, AIC's chief executive, Robert Sheasby, told Mr Bailey that the imposition of additional finance costs on business through base rate increases would lead to increased costs for farms and eventually consumers.
He said: "This will further lead to AIC member businesses and farming customers to use debt to finance transactions on large scale purchasing accelerating this cost and diminishing the reductions seen in some spot prices.
"Our members are also reporting that employees are starting to make approaches regarding in-year increases in salaries in order to assist with the cost of living, including impacts arising from rents and mortgage rate changes.
"Members have highlighted that as the next quarter develops, subject to any unforeseen impacts, reduced commodity prices should be expected, which in turn should benefit the consumer.
"This can only happen if subsequent costs to business have not been put up by additional finance to business and employees."
Mr Sheasby added: "AIC would therefore urge a cautionary approach to further rate rises at this time to avoid 'baking in' inflationary costs for business and the wider economy."
