Lloyds TSB: Consumers doubt longevity of interest rate cuts

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Lloyds TSB: Consumers doubt longevity of interest rate cuts

Thu 7th Feb 2008

Analysts are forecasting that the Bank of England will announce a cut in interest rates today, but the latest Consumer Barometer from Lloyds TSB Corporate Markets shows that most consumers believe lower interest rates will not last.

The survey of 2,000 consumers found that the number of people expecting higher rather than lower interest rates in 12 months' time grew by two per cent in January to 27 per cent.

Lloyds TSB believes that the shift in consumers' perception of interest rate cuts is largely due to their increasingly negative view of inflation.

According to its research, the number of consumers who believe that prices have risen over the past year and are set to rise again over the next 12 months has reached record highs, up to 86 per cent.

Trevor Williams, chief economist at Lloyds TSB Corporate Markets, said: "Our survey suggests that an interest rate cut today may do little to boost confidence in the short run because of the view that it will be reversed within a year."

He added that consumers are "increasingly feeling the strain" of high prices on commodities such as food and fuel.

Nationwide reported yesterday that their Consumer Confidence Index fell to its lowest level last month since the survey began in 1967, from 85 points to 81.

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