The Bank of England will raise interest rates from their historically low levels in May, the British Chambers of Commerce (BCC) has predicted.

The group also downgraded its UK GDP growth forecast to 1.4% for 2011, lower than its December projection of 1.9%.

David Kern, chief economist at the BCC, said: "Given the shift of opinion within the Monetary Policy Committee, we assume interest rates will increase from May."

However, he warned that any hike in rates could derail the recovery.

"We believe this will be premature and risky in view of the fragility of the recovery and tough fiscal measures expected in the Budget," he said.

The BCC added that the primary reason it downgraded its growth growth projection for 2011 was the unexpected 0.6% GDP contraction in Q4.

BCC director general David Frost stressed more needed to be done to help UK businesses.

"British businesses will welcome the government's desire to boost enterprise and reduce red tape but these words must be backed by action," he said.

"While we support efforts to reduce the UK's deficit, these measures alone will not deliver a sustainable recovery."

The BCC also upped its growth prediction for 2012 from 2.1% to 2.3%, saying current attempts to rebalance the economy towards the private sector will improve the economy's long-term prospects.

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