More than a third of Britons now expect an interest rate rise in the next year, the Bank of England’s latest snapshot of inflation attitudes revealed today.
Its survey of nearly 2,000 people showed 34% of respondents expect rates to rise over the next 12 months, up from 29% in August, despite the Monetary Policy Committee’s pledge not to consider hikes until unemployment falls to 7%.
The MPC — which monitors inflation expectations in case they feed into higher wage demands — will also be worried by bleaker views on the cost of living. Against a backdrop of rising energy bills, people in the survey sample believe the current rate of inflation is twice as high as it actually is — 4.4% compared with October’s 2.2% consumer prices index reading. Over the next year, respondents expect 3.6% inflation on average, against 3.2% in August. The Bank’s official inflation target is 2%.
The MPC will be concerned if inflation expectations show signs of getting out of control as this is one of the three “knockouts” for its forward guidance regime, experts said.
IHS Global Insight’s Howard Archer said: “While the Bank will not be pleased to see a marked rise in the balance of people expecting interest rates to rise ... [it] will likely argue that even more people would be expecting rate rises were it not for forward guidance, given the recent improvement in the economy.”
