Inflation expectations rise slightly as BoE releases latest survey

Public expectations for inflation and interest rates have edged higher, according to the Bank of England’s latest quarterly Inflation Attitudes Survey, conducted by Ipsos.

The survey, which gauges public sentiment on inflation and monetary policy, shows a modest increase in inflation expectations since November 2024.

When asked to estimate the current rate of inflation, respondents gave a median answer of 4.9%, up slightly from 4.8% in the previous survey. Looking ahead, expectations for inflation over the next year rose to 3.4% from 3%, while the two-year forecast increased to 3.2% from 2.8%. Longer-term inflation expectations, covering a five-year period, also ticked up to 3.6% from 3.4%.

ECONOMIC CONCERNS PERSIST

The survey highlights ongoing economic concerns, with 71% of respondents believing that a faster rise in prices would weaken the economy, up from 66% in November. In contrast, just 4% thought the economy would grow under such conditions.

Confidence in the Bank of England’s inflation target declined slightly. 39% of respondents felt the current target was “about right,” down from 42%, while 33% believed it was “too high,” and 11% thought it was “too low.”

PUBLIC PERCEPTION OF INTEREST RATES

Views on past interest rate movements saw a slight shift. 41% of respondents said mortgage, loan, and savings rates had increased over the past year, down from 45%, while the number of people who believed rates had fallen rose to 28% from 25%.

Looking ahead, 34% of those surveyed expected interest rates to rise over the next year, a slight increase from 33% in November. However, the proportion predicting a rate cut fell to 29% from 34%, while 23% anticipated no change.

When asked what would be best for the economy, 38% of respondents supported lower interest rates (down from 41%), while 11% backed higher rates, unchanged from the previous quarter. 25% thought rates should remain stable.

IMPACT ON HOUSEHOLDS

On a personal level, 26% of respondents felt they would benefit from higher interest rates, up from 24%, while 31% said they would be better off if rates fell, a slight decline from 33%.

Public satisfaction with the Bank of England’s handling of interest rates to control inflation showed minor improvement. The net satisfaction balance—the percentage satisfied minus those dissatisfied—stood at 1%, up from -1% in November.