UK consumers see interest rates cuts reversed with a year - Lloyds TSB

UK consumers expect any cut in borrowing costs to be short-lived, with more than half believing that interest rates will be higher within a year, according to a survey by a leading bank.
The Lloyds TSB Consumer Barometer found 52 pct of consumers expect interest rates will be above current levels in 12 months time, with 25 pct expecting them to be lower and 19 pct unchanged. The resulting balance of +27 pct is up by 2 percentage points on last month -- the first time the balance has grown after six months of successive falls.
This comes in spite of the fact the majority of economists are forecasting the Bank of England to cut interest rates tomorrow by a quarter point to 5.25 pct and take rates even lower over the coming months.
Trevor Williams, chief economist at Lloyds TSB, said consumers' expectation that any fall in borrowing costs will be short-lived probably reflects their outlook of rising inflation.
"Consumers are clearly increasingly feeling the strain of higher prices -- energy and food in particular -- and this is starting to convince them that the Bank of England will be forced to keep interest rates high in order to keep inflation under control," Williams said.
This is reflected in the fact that a balance of +84 pct of respondents expect prices in general to be higher in 12 months time.
The survey of 2000 people also found consumers are increasingly nervous about job security. A balance of 6 pct said they felt their job was less secure than a year ago, while a balance of 30 pct said they thought employment prospects in the UK in general are worse then they were 12 months earlier.