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Britons expect inflation will gather pace over the coming year, increasing
the pressure on members of the Bank of England Monetary Policy Committee
as they as respond to slowing growth and rising price pressures.
A survey by the Bank showed Britons' expectations of future inflation rose to
a record 3.3% in February, more than a percentage point above the actual rate of
inflation.
MPC members are worried that high inflation expectations can become
self-fulfilling as workers demand higher wages to keep up with living costs -
what ECB President Jean-Claude Trichet terms "second-round effects. With
commodities surging inflation will remain a concern.
At 3.3%, inflation expectations are at their highest since the
Bank
began its survey in November 1999. Britons' expectations of future inflation
have risen steadily higher over the past year as food prices, energy bills and
petrol costs have all rocketed. In November, the median was 3%. A year ago it
was 2.7%.
Highlights from the
survey
Question 1:
Asked to give the current rate of inflation,
respondents gave a median answer of 3.9%, a series high, compared with 3.2% in
the November 2007 survey, the previous series high.
Question 2:
Median expectations of the rate of inflation over
the coming year were 3.3%, a series high, compared with 3.0% in November, the
previous series high.
Question 3:
By a margin of 63% to 4%, survey respondents
believed that the economy would end up weaker rather than stronger if prices
started to rise faster. This margin was the widest since the survey began.
Question 4:
46% of respondents, a series low, thought the inflation target was ‘about
right’, while the proportions saying the target was ‘too high’ or ‘too low’ were
20% and 14% respectively.
Question 5:
58% of respondents said that interest rates had risen over the past 12 months,
compared with 73% in November. 10% of respondents thought that interest rates
had fallen over the past 12 months, compared with 2% in November. The survey was
conducted after the interest rate cut on 7 February.
Question 6:
When asked about the future path of interest rates, 43% expected rates to rise
over the next 12 months, compared with 52% in November. 20% of respondents
expected interest rates to fall over the next 12 months, compared with 15% in
November.
Question 7:
Asked what would be ‘best for the economy’ – higher
interest rates, lower rates or no change – 7% thought rates should ‘go up’,
compared with 9% in November. 35% of respondents thought that interest rates
should ‘go down’, compared with 39% in November. 30% thought interest rates
should ‘stay where they are’, the same proportion as in November.
Question 8:
When asked what would be ‘best for you personally’, 15% said interest rates
should ‘go up’, similar to responses over the past few years. 37% of respondents
said it would be better for them if interest rates were to ‘go down’, compared
with 45% in November.
Questions
9-13 are asked only once a year in
February.* The results of the responses to these questions will be published as
part of the full analysis of the opinion poll in the Bank’s Quarterly Bulletin
Q2 2008 (June).
Question 14:
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 30%, compared with
31% in November. This was the lowest net satisfaction index outturn since May
2000, when it was also 30%.
GfK NOP interviewed a quota sample of 3,985
people aged 15 and over in 350 randomly-selected enumeration districts
throughout Great Britain between 7 and 19 February 2008. The raw data were
weighted to match the demographic profile of Great Britain as a whole.
*Although the main survey is conducted quarterly,
the February survey each year includes five extra questions, the answers to
which have been shown to change slowly over time, and is double the sample size
of the other surveys.
