Consumers 'preparing for further rate rises'
Published On 30 July 2007
Despite July's increase by the Bank of England, consumers still expect further interest rate rises within the year, new research shows.Earlier this month, the Bank of England's Monetary Policy Committee increased interest rates by 0.25 per cent to 5.75 per cent. However, Lloyds TSB's latest Consumer Barometer shows that consumers are still readying themselves for more rises in the future.
Over three quarters (79 per cent) of consumers said that they expected rates will be higher in 12 months' time. Just five per cent believed interest rates would have dropped in a year's time.
Even though consumer price index (CPI) inflation dropped from 2.5 per cent in May to 2.4 per cent in June, 77 per cent of consumers still expect prices to be higher this time next year.
"The interest rate hike in July did little to reassure consumers there was an end in sight to the increases and they widely seem to agree with the prevailing view in financial markets that at least one more hike is on the horizon," explained Trevor Williams, chief economist at Lloyds TSB Corporate Markets.
"This is probably a good thing in that it suggests consumers are preparing for higher mortgage payments."
The next interest decision on interest rates is due on August 2nd.
