Bradford businesses are set for a challenging few months after the Bank of England decided to raise interest rates to 5.75 per cent, with forecasters predicting further rises by the year's end.

Bradford Chamber said that the latest rise in rates will stifle companies' abilities to forge plans and expand their businesses.

The bank's Monetary Policy Committee decided to lift the cost of borrowing by a quarter percentage point, the fifth time it has done so since August last year.

And there may be further rises to come, with financial consultants Punter Southall predicting a hike to six per cent by the end of 2007.

President of Bradford Chamber, Richard Wightman, said: "Companies are now bracing themselves for more difficult conditions in months to come.

"Our members will agree with the view that, even though the rise was widely expected, the policy stance of the monetary policy committee is now too assertive.

"Inflation has fallen a little from earlier this spring, and the ratcheting up of rates makes it more difficult for companies to plan and expand.

"We would like to see a period of consolidation. Not enough time has been given to see the effects of recent increases, and the exchange rate of the pound is now exceptionally high against the dollar.

"It is a tough market out there, especially for those trading internationally, although we recognise that the Bank of England has other factors to take into consideration, such as reigning in consumer credit and spending.

"It seems, though, that the use of interest rates to control spending is not working."

Lenders today said it was too soon to say how the latest increase would affect its mortgage and loan products.

In January Skipton Building Society withdrew some of its fixed rate mortgage offers following the bank's increase in rates to 5.25 per cent.

However spokesmen for both SBS and Bradford-based Yorkshire Building Society, said it would be a few days before news on whether or not it would make changes came to light.