The survey of 2,000 consumers in November, found the 1.5 per cent interest rate cut has so far had little impact on interest rate expectations for next year. Forty per cent of consumers believed interest rates will be higher next year and the balance of those expecting higher, rather than lower, rates remained at unchanged from October at 10 per cent.
Falling petrol prices in recent weeks encouraged increasing optimism about prices for the coming year. The balance of consumers that expected prices to be higher, rather than lower, in 12 months' time fell 16 per cent to 40 per cent. However, 58 per cent of consumers still expected prices to be higher next year.
Trevor Williams, chief economist, Lloyds TSB Corporate Markets, said: "November's surprisingly large interest rate cut has so far had little impact on consumer confidence, according to our survey. And despite market speculation that rates could fall even further on Thursday and next year, consumers still believe rates are set to rise. This will be of concern for the high street because, even with easing price expectations, if consumers remain dubious about the prospect of lower rates, they could hold off on their spending.
"But we should not yet lose hope of a burst in spending before Christmas. A further cut in interest rates this week, on top of today's VAT reduction, could provide the confidence boost that consumers need. It may well just be a matter of time before consumer expectations adjust to the reality of lower interest rates."
