stores, a Chamber of Commerce spokesman warned yesterday.

But a wholesaler said the effect of the increases would be small.

Yesterday, Meyer Agencies Ltd. president Mr. Henry Hayward said that freight rates on the container ship Bermuda Islander would rise on January 8 by about the same amount as an Oleander freight rate increase announced earlier.

Bermuda Container Line Ltd. announced freight rates on the Oleander would rise an average of 7.5 percent effective on January 1.

The two companies, which earlier this year announced an agreement on an increase they said would help offset years of financial losses, stressed that the increase would still leave most freight rates below 1985 levels.

They also promised discounts for cash payments.

Merchants had benefited from rate reductions over the years, Mr. Hayward said.

"If the lines are going to continue to operate, and if they are going to get their freight, we've got to be realistic.'' Mr. Bobby Rego, vice-president of the Chamber of Commerce, said the discount the lines were offering for cash payments within five days would reduce the effect of the increase to about 3.5 percent.

But retailers had been absorbing increased costs for the past year, and "everyone is at the point now where there is nothing left to absorb,'' Mr.

Rego said. "It's just got to be passed on.'' Citing the pact between Bermuda Container Lines and Bermuda Islander owner Bermuda International Shipping Ltd., Mr. Rego predicted further rate increases.

"The only thing that has held the rates down is competition,'' he said.

"Since the lines have basically joined hands, we've lost that competition.'' Despite Mr. Rego's comments, food wholesaler Mr. Tony Brewer said he expected the effect of the rate increases would be minimal.

"It may amount to two or three cents an item,'' said Mr. Brewer, president of A.C. Brewer Distributors Ltd.

The container lines had been losing money and "at some stage there has got to be a levelling of costs,'' Mr. Brewer said.