Consumers predict a rise in rates

09 January 2006
Despite a sharp fall in inflation UK consumers believe interest rates are on the rise again, according to research from Lloyds TSB.

The bank's December Consumer Barometer found 61 per cent of people believed that interest rates would rise this year, compared with just 11 per cent expecting a fall.

This outlook was felt by the majority despite beliefs that prices in December 2005 were less than that of 2004 – implying a less inflationary outlook.

The research also revealed that 20 per cent of people feel more secure about their own job than they did 12 months ago, while 24 per cent feel less secure.

It seems the picture has remained fairly steady when compared to November.

Trevor Williams chief economist at Lloyds TSB Financial Markets said: "December's data shows that consumers are not expecting the interest rate cuts that are starting to be called for by some within the industry and increasingly expected by the financial markets.

"With the latest PMI figures showing service sector growth rising faster than expected, making a recovery in economic growth in 2006 is more likely, they may be right."

He added: "Calls for a rate cut now are somewhat premature and the next move in base rate is more likely to be a rate hike based on recent evidence from the housing market – but not until the second half of the year."

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