UK consumers expect inflation to keep falling - BoE
By Abigail Townsend
Date: Friday 14 Jun 2024
(Sharecast News) - Expectations for inflation have fallen to a three-year low across the UK public, a Bank of England survey showed on Friday.
Publishing its quarterly Inflation Attitudes Survey, the BoE - which is due to publish its latest decision on interest rates next week - said the average Briton expected price growth to be 2.8% in the next 12 months.
That was down on February's survey, when 3% was forecast, and is the lowest prediction since August 2021.
Inflation expectations play a key role in both consumer confidence and spending as well as pay rates.
However, asked to give the current rate of inflation, respondents gave the median answer of 5.5%. Although down from the 6.1% cited in the previous survey, it remains notably above the actual rate of 2.3%.
A total of 10% thought rates going up would be best for the economy, while 42% thought they should be trimmed and 24% said they should be left on hold.
The rate-setting Monetary Policy Committee's decision is due on Thursday.
In common with other central banks, it hiked rates to tackle surging inflation. Following 14 increases, however, it has now left the cost of borrowing on hold since August, reflecting the fall in inflation.
But while the consumer price index is now well off a peak of 11.1% reached in October 2022, it is coming down slower than expected, primarily due to higher-than-anticipated price growth in the service sector. It also remains just above the BoE's long-term target of 2%.
Most economists expect the MPC's next step will be a cut in August.
Andrew Montlake, managing director at mortgage broker Coreco, said: "The fact that the current rate of inflation is perceived to be 5.5% suggests the cost of living crisis still feels very real.
"Though many in the UK would prefer higher rates, those with significant savings are dwarfed by people with significant debt. The effect of rate rises has been ubiquitous and everyone has felt the consequences of both global factors and Liz Truss's brief spell in Number 10."
The European Central Bank cut rates for the first time in five years last week. It cautioned against expectations for another imminent cut, however.
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