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Consumers continue to expect interest rates to be higher in 12 months' time than their current 5.5 per cent level, according to the Lloyds TSB consumer barometer.

The Bank of England raised interest rates by a quarter-point to 5.5 per cent in its May decision and, as it considered a 0.5 per cent increase then, many fear a further hike later this week.

In April the balance of consumers expecting higher rates minus those expecting lower rates stood at 76 per cent as inflation shot above the three per cent threshold.

One month later the balance has fallen to 70 per cent – a surprisingly insignificant drop, Trevor Williams, chief economist of Lloyds TSB corporate markets, believes.

"Last month's interest rate rise did little to convince consumers that rates had reached a peak. In line with the prevailing opinion of the financial markets, consumers believe rates will increase further this year," he commented.

"We're just beginning to see the impact of May's rate rise on consumers with sentiment on job security and prices starting to cool. Even so, there is still some way to go before the Bank of England will be reassured; they have emphasised that for inflation to stay low, inflation expectations must be anchored at low levels."

The barometer showed the balance for job security had fallen from plus one in April to minus two in May, while the balance for price changes in the next 12 months fell one point to 74 per cent.