In its quarterly economic forecast, the body said UK unemployment is likely to increase by 250,000 to 300,000 over the next two to three years.
This would take the number of unemployed people to two million, although the BCC insisted an increase above two million could not be ruled out.
Unless the Bank of England moves to cut interest rates, the situation could deteriorate as a recession takes hold in the country, it claimed.
David Kern, economic adviser to the BCC, said: "Our view is that the threats to growth are more serious and more immediate than the risks of higher inflation. The UK economy urgently needs an interest rate cut to counter threats of recession."
The BCC is also urging the government not to increase taxes on business, as this will put further pressure on employers already facing difficult decisions.
According to the latest labour market outlook survey from the Chartered Institute of Personnel and Development, 27 per cent of employers are planning to make some staff redundant during the third quarter of this year.
