The UK publics’ expectations for inflation over the next year jumped to 3.3% in May, the highest level in almost 2yrs, reveals the Bank of England/NOP Inflation Attitudes Survey – May 2010
Asked to give the current rate of inflation, respondents gave a median answer of 3.6%, compared with 3.3% in February 2010.
Median expectations of the rate of inflation over the coming year were 3.3%, compared with 2.5% in February (the last time it was 3.3% or higher was in August 2008 when it was 4.4%).
By a margin of 56% to 11%, survey respondents believed that the economy would end up weaker rather than stronger if prices started to rise faster, compared with 60% to 9% in February.
56% of respondents thought the inflation target was ‘about right’, a slightly higher proportion than in recent quarters, while 17% said the target was ‘too high’ and 15% said it was ‘too low’.
34% of respondents thought that interest rates had fallen over the past 12 months, compared with 41% in February, while 23% of respondents said that interest rates had risen over the past 12 months, the same as in February.
When asked about the future path of interest rates, 52% of respondents expected rates to rise over the next 12 months, compared with 54% in February, and 6% of respondents expected interest rates to fall over the next 12 months, similar to the last couple of quarters.
Asked what would be ‘best for the economy’ – higher interest rates, lower interest rates or no change in interest rates – the picture was broadly unchanged from recent quarters: 25% of respondents thought interest rates should ‘go up’, 15% of respondents thought that interest rates should ‘go down’, and 37% thought interest rates should ’stay where they are’.
When asked what would be ‘best for you personally’, 25% of respondents said interest rates should ‘go up’, compared with 28% in February, while 26% of respondents said it would be better for them if interest rates were to ‘go down’, compared with 25% in February.
When asked how strongly respondents agreed or disagreed that a rise in interest rates would make prices rise more slowly in the short term, the net response was +15% in February 2010, compared with +14% in February 2009.
When asked how strongly respondents agreed or disagreed that a rise in interest rates would make prices rise more slowly in the medium term, the net response was +24%, compared with +26% in February 2009.
When asked in February if a choice had to be made either to raise interest rates to try and keep inflation down, or to keep interest rates lower and allow prices to rise faster, 66% of respondents said interest rates should rise, while 17% said prices should be allowed to rise. These compared with 66% and 13% in February 2009.
Respondents were asked to assess the way the Bank of England is ‘doing its job to set interest rates to control inflation’. The net satisfaction index – the proportion satisfied minus the proportion dissatisfied – was +29%, compared with +28% in February.