The Ernst & Young ITEM Club said the MPC should avoid raising interest rates ahead of reliable evidence the corporate recovery was fully under way, despite high inflation.
Inflation fell by 0.4% to 4% in March as the cost of food and drink lowered, but it is still double the Bank of England’s target.
It was the first fall in the consumer price index (CPI) for eight months and marked a drop from the 28-month high of 4.4% in February.
The ITEM Club expects inflation to ease naturally next year, once the VAT increase and other temporary factors passed out of the index.
It also said with the prospects of a consumer-led recovery clearly “non-existent” at the moment, businesses were likely to take centre stage in the growth of the UK economy.
It expects business optimism to rise on the back of a healthy world economy, leading to a long-awaited loosening of company coffers, with business investment increasing by 12% this year and 14% in 2012.
The group said Chancellor George Osborne was still on track to meet the fiscal target of balancing the books by the end of the current Parliament, but the biggest threat to the recovery was the MPC’s ability to “stay the course”.
