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Leaviss believes deflation is threat

Consumers are in for a nightmare ride this year before interest rates settle down in 2009, says M&G Investments head of fixed income Jim Leaviss.

Consumers are in for a nightmare ride this year before interest rates settle down in 2009, says M&G Investments head of fixed income Jim Leaviss.

Speaking at last week’s Cofunds and Legal & General conference on the impact of global uncertainty, Leaviss cited deflation as the greatest threat facing the UK.

Leaviss said: “We are at an inflection point, with low-level growth and a deflationary period ahead of us and portfolios need to acknowledge this.”

He supported recent claims by the Government that the UK is well placed to weather the economic storm but warned that tough times lie ahead.

Leaviss said: “It will be a nightmare ride for consumers. Current inflation levels are worrying but controllable and interest rates should start to fall in 2009.”

After giving a bearish outlook on global growth, he expressed optimism about the banking sector and praised Federal Reserve chairman Ben Bernanke for restoring stability on the markets and steering the world clear of a full-scale collapse. However, on China, Leaviss said a period of unrest and geopolitical worry could emerge when the Olympics end.

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