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February 8, 2008

Consumers pessimistic on lower interest rates

by Gill Montia

Story link: Consumers pessimistic on lower interest rates

Yesterday’s base rate cut to 5.25% may not convince Britons that the Bank of England will be able to continue to reduce interest rates.

According to the latest Consumer Barometer from Lloyds TSB Corporate Markets, the number of consumers expecting higher rather than lower interest rates in 12 months’ time increased by 2% in January, to 27%.

The survey, which questions 2,000 UK adults, found that January was the first month to see a rise in the number of people expecting higher interest rates a year ahead, since the middle of last year.

The research suggests that consumer confidence is becoming more fragile; despite current low levels of unemployment, the number of respondents feeling more rather than less secure in their jobs (compared to 12 months ago) fell to 16% in January, compared to the six month average of 20%.

Trevor Williams, chief economist at Lloyds TSB Corporate Markets, comments: “Consumers are clearly increasingly feeling the strain of higher prices - energy and food in particular - and this is starting to convince them that the Bank of England will be forced to keep interest rates high in order to keep inflation under control.”

The survey also found that 86% of respondents expected prices to have risen in 12 months’ time.

 

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