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UK consumers expect interest rates, inflation to rise within a year - survey
LONDON (Thomson Financial) - UK consumers fully expect both interest rates and inflation to be higher than they are at present in a year's time, despite the fact that interest rates have risen five times in the past year, a survey has found. In July's Consumer Barometer, published by Lloyds TSB Corporate Markets, 79 pct of people surveyed expected rates to increase over the next 12 months, while 5 pct predicted lower rates -- giving a balance of +74 pct, down one point from last month. The balance of people expecting prices to rise over the same period, meanwhile, remained elevated at +77, three points higher than last time, and near the survey's record high of +79. This suggests consumers are unlikely to be caught off-guard by rising mortgage payments if the BoE hikes interest rates again. The central bank has raised interest rates five times since last August, bringing it to 5.75 pct. And while the annual CPI inflation rate has eased slightly, it remains well above the BoE's target of 2 pct. '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,' said 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 survey also showed there is still pessimism about job prospects, despite continuing strong economic growth and that a record number of people are in employment. The balance of consumers feeling more, rather than less, positive about their jobs fell to -20 pct, from -17 pct in June. Consumers also felt that job prospects generally across the UK had not improved, with the balance of consumers believing prospects were better now compared to 12 months ago at 4-, unchanged from June. 'The growing uncertainty consumers feel about the labour market should appear in weaker confidence indices and a slowdown in spending in the coming months,' said Williams. [size=1][color=silver][email][email protected][/email] cml/slj COPYRIGHT Copyright AFX News Limited 2007. All rights reserved. The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News. [/color][/size]