Consumers inflation expectations fell last month and their satisfaction with the Bank of England deteriorated as inflation remained at more than twice policy makers’ two per cent target.
UK consumers questioned in November expected prices to rise 4.1 per cent over the next year, according to the Bank of England’s Inflation attitudes survey published today (15 December).
Consumers’ satisfaction with the Bank of England fell to its lowest since November 1999, when the survey was first published, according to today’s report.
Asked how well they think the bank is setting interest rates to control inflation, 33 percent said they were satisfied and 25 percent were dissatisfied. The net balance of nine was down from 16 in August.
When asked about median expectations of the rate of inflation over the coming year, respondents answered 4.1 per cent, slightly lower than the 4.2 per cent recorded in August.
For 2013, respondents expect inflation to be a median of 3.4 per cent and they expect inflation to be 3.5 per cent in five years’ time.
When asked about the future path of interest rates, 39 per cent of respondents expected rates to rise over the next 12 months, compared with 38 per cent in August. Around six per cent of respondents expected interest rates to fall over the next 12 months, compared with 7 per cent in August.
When questioned about what monetary policy would be beneficial for the economy, 15 per cent thought that interest rates should increase, 20 per cent thought interest rates should go down and 35 per cent thought interest rates should stay as they are.
The survey sample was 1,835 people aged between aged 16 and over.
Anna Smee, director of strategy consulting firm, Hundred, said: “At a time of rising unemployment and negligible wage inflation, many people will be concerned by the prospect of inflation remaining above four per cent.
“Large numbers of savers, particularly the baby boomer generation who are retiring, are being forced to look on helplessly as their savings erode due to inflation levels exceeding interest rates.
“Most people are feeling the pinch as the cost of day-to-day expenses such as the supermarket shop rise faster than salary levels.”
She highlighted that it was “little surprise” that most people expect interest rates to rise over the next twelve months in order to tackle inflation.
Ms Smee said: “However, when it comes to the impact of higher interest rates on them personally, people are divided.
“For those with high levels of borrowing in the form of mortgages or credit cards, low interest rates represent a key support and the prospect of rate rises is a worry. Savers, on the other hand, will be hoping interest rates rise quickly to protect their wealth.
“Predictably perhaps, fewer people now believe the Bank of England is doing its job to control inflation. With inflation consistently double the Bank’s target, how could it be otherwise?”