Consumers 'not shocked' by interest rate hike

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Consumers 'not shocked' by interest rate hike

Wed 16th May 2007

Last week's quarter point interest hike by the Bank of England has not provided a shock to consumers as many were prepared for the rise, new figures suggest.

The latest consumer barometer from Lloyds TSB indicates that four-fifths of consumers predicted that interest rates would be higher during the same month next year.

Just four per cent of consumers speculated that rates would be lower at this stage next year.

The Lloyds TSB barometer also indicated that consumers are pessimistic about prices, with the proportion of people thinking they had risen rather than fallen over the past year increasing to the highest point for six months.

Trevor Williams, chief economist at Lloyds TSB, said: "Pretty much everyone expected the base rate to rise last week. For consumers, forewarned is forearmed and the impact is likely to be much less than if the rise came out of the blue.

"With high price expectations and the recent rate rise we're likely to see some slowdown in consumer spending but with job security remaining strong, the impact won't be drastic," he added.