UK public satisfaction with how the Bank of England handles inflation has fallen to the lowest level on record, according to official data on Thursday.
In August, one-third of people in the UK were dissatisfied with how the central bank was controlling inflation, its own survey found.
This is the worst result since records began in 1999 and pushed net satisfaction to minus 7 per cent, also a record and the only other negative reading since May’s minus 3.
The data come a week before the next meeting of the BoE’s Monetary Policy Committee, where it is expected that interest rates will be raised for the seventh consecutive time as the bank seeks to tame high prices.
Myron Jobson, senior personal finance analyst at the investment broker Interactive Investor, said the response to the survey, was “by no means a glowing endorsement” of the BoE’s approach to interest rates.
Most economists expect the BoE to lift the base rate from its current 1.75 per cent to curb inflation, which was at 9.9 per cent last month. That is the highest in the G7 group of leading economies and almost five times the bank’s 2 per cent target.
Markets and economists are split between a 50 basis and 75 basis points increase.
Andrew Goodwin, chief UK economist at the consultancy Oxford Economics, said the £150bn energy support package announced by the government last week, which will limit yearly domestic bills to £2,500, had lowered expectations for peak inflation. But he said that “the support to disposable incomes offered by the cap means the MPC may judge medium-term inflation will be higher”.
The bank could “use looser fiscal policy as a reason to continue raising rates aggressively”, he added.
While Goodwin expected a 50 basis points rise, Ellie Henderson, an economist at the investment bank Investec, said there was “certainly the risk that more MPC members will join the hawkish camp, swinging the majority to a three-quarter point move”.
Respondents to the BoE survey, which occurs every three months, expected inflation over the coming year to be 4.9 per cent, on average, up from 4.6 per cent in May and the highest on record.
This is a sign the public thinks high inflation has become largely entrenched in the economy.
People also think inflation will continue to remain high in the longer term. The inflation rate in five years’ time was expected to be 3.1 per cent, well above the target of price stability even if marginally down from 3.5 per cent in May.
The latest inflation rate was perceived to be accelerating to 7.6 per cent, up from 6.1 per cent in May and the highest on record.
A high-inflation environment is seen as detrimental to the economy and responsible for higher interest and mortgage rates.
Some 75 per cent of respondents expected interest rates to rise in the year ahead, with about two-thirds expecting a negative impact on the economy from high inflation.
Source: Economy - ft.com
