Consumption and Interest Rates - speech by Timothy Besley

In a discussion meeting held today by the Centre for Economic Policy Research and the Economic and Social Research Council at Chartered Accountants' Hall, Professor Timothy Besley - external member of the Monetary Policy Committee - considers the relationship between interest rates and consumer spending, and the factors that may determine how consumption evolves over the medium term.
Published on 19 July 2007

Consumer spending comprises 64% of GDP and may provide a good indicator of the strength of the economy. Annual consumption growth has increased over the recent past to an estimated 3.0% in 2007 Q1. How consumers respond to recent monetary tightening is a key judgment in the current policy debate.

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