LONDON (Reuters) - Tesco Plc (TSCO.L: Quote, Profile, Research, Stock Buzz), Britain's biggest retailer, urged the Bank of England not to "overdose" on interest rate increases, saying consumer spending growth was already slowing and that past rate hikes had yet to bite.
"All we would urge is the Bank of England to be careful," Tesco Finance and Strategy Director Andrew Higginson told the Reuters Consumer and Retail Summit on Wednesday.
"I think Tesco's view would be...let's see how these (past interest rate increases) play out before rushing to overdose with some fairly sharp medicine."
Earlier on Wednesday, minutes of the Bank of England's Monetary Policy Committee meeting for June showed the committee voted 5-4 to keep interest rates at 5.5 percent, with Governor Mervyn King among a minority voting for an immediate 25 basis points increase -- prompting analysts to say a further rate rise next month now looks more likely. The BoE has raised borrowing costs four times -- by 100 basis points in total -- since last August.
"I think they're looking to keep the very successful track record they've had on wage inflation ... and I think the only significant pressure that's really out there at the moment, in terms of inflationary pressure that might lead to higher wage demands, would probably be mortgage costs," Higginson said.
"So the one thing that they're using as a brake is the one thing that could end up driving exactly the sort of pressures they're trying to avoid."
Tesco said on Tuesday its UK like-for-like sales, excluding fuel, rose 4.7 percent in the first quarter of its financial year, down from 5.8 percent in the previous quarter and below analysts' average forecast of 5.2 percent in a Reuters poll.
The firm blamed a slowdown in non-food sales growth, but said it was still taking market share in that category.
"It's a classic sign of people tightening their belts. The first things to go are some of the discretionary areas of spend," Higginson said. Continued...
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