Consumers believe rate rises on way
Updated on 01 December 2008
Consumers believe interest rates will rise next year despite widespread expectation by analysts that rates could fall below 1%, according to a new study.
A survey of 2,000 adults by Lloyds TSB showed that almost three out of five expected the price of goods to be higher in 2009, despite recent falls in petrol prices.
One in three said their job was less secure than a year ago and most believed employment prospects generally were worse.
Two out of five said interest rates would be higher next year, while fewer than a third thought they would fall.
Trevor Williams, chief economist of Lloyds TSB Corporate Markets, said: "November's surprisingly large interest rate cut has so far had little impact on consumer confidence, according to our survey.
"Despite market speculation that rates could fall even further on Thursday and next year, consumers still believe rates are set to rise. This will be of concern for the high street because, even with easing price expectations, if consumers remain dubious about the prospect of lower rates, they could hold off on their spending.
"But we should not yet lose hope of a burst in spending before Christmas. A further cut in interest rates this week, on top of today's VAT reduction, could provide the confidence boost that consumers need."
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