John Lewis chief warns against interest rate rises

Street, who this week revealed that the department store chain would open a store in Birmingham in 2014, said: “Putting up interest rates would not make a jot of difference to inflation. But it would make a big difference to consumer confidence.”

His comments come as economists debate what impact - if any - a rates rise would have on slowing inflation or whether price rises have been exacerbated by the increase in overseas commodity prices.

Should interest rates rise from their historical low of 0.5% by 0.25%, the rise would add £40 to the monthly bill of the average British mortgage holder.

Street told the Independent that the increase would have a “psychological and real” impact on consumers.

He added: “We did have a barnstorming year in 2010 and it is much more subdued now.”

But he predicted that the issues affecting shopper behaviour, such as uncertainty over public sector job losses and spending being bought forward to before the rise in VAT to 20% on January 4, would ease and that the retailer was predicting “small underlying growth for the year”.