Public confidence in the Bank of England has plunged to a record low amid the cost-of-living crisis and soaring interest rates, according to the central bank’s own survey of household attitudes.
(Bloomberg) — Public confidence in the Bank of England has plunged to a record low amid the cost-of-living crisis and soaring interest rates, according to the central bank’s own survey of household attitudes.
Two in five Britons, 40%, think the bank is doing a bad job of handling inflation, up from 34% in May. Only 19% are satisfied. The net dissatisfaction rating of minus 21% in August, down from minus 13% in May, is the worst since the BOE began collecting the data in 1999.
The quarterly inflation attitudes survey of 16-75 year olds conducted by Ipsos suggests the central bank has lost the trust of the general public after delivering the most aggressive rate-hiking cycle in decades in a bid to tame rocketing prices.
The findings are also bad news for Prime Minister Rishi Sunak, who faces the prospect of a possible recession and significant further price rises between now and a general election expected next year. His Conservative Party continues to lag the Labour opposition by double digits in opinion polls.
Policy makers led by BOE Governor Andrew Bailey have already moved to address the issue, calling on former US Federal Reserve Chair Ben Bernanke to review the UK central bank’s forecasting model and communications. Officials on the nine-member Monetary Policy Committee also have returned from their summer holidays speaking more clearly about where rates are headed and about the decisions they have to make.
The outlook is for at least one more rate hike as early as next week. And figures out Friday suggest that attitudes about spiraling prices are hardening — another up arrow for interest rates.
Consumers believe prices will be higher for longer than they did three months ago, the BOE survey showed. Inflation expectations for the year ahead rose from 3.5% to 3.6% and for two years ahead from 2.6% to 2.8%. While the year ahead figure has coasted down from as much as 4.9% a year ago, it’s still well above the 2% target.
Policy makers led by Governor Andrew Bailey are watching inflation expectations carefully to determine how much further they have to raise interest rates to ward off an upward spiral in prices.
The economy is showing signs of buckling under higher interest rates, with unemployment rising and the gross domestic product contracting in July.
Inflation was in double digits at the start of the year, far above European and US averages, but has fallen closer into line at 6.8%. That has come at the cost of higher borrowing costs.
The BOE has raised rates to 5.25%, the highest in 15 years and up from 0.1% in December 2021. They are expected to rise to 5.5% next week, but may stop at that point.
Almost two thirds of respondents, 63%, expect further interest rate rises in the year ahead.
- BOE Turning Gloomier on UK Outlook Brings Rate Pause Into View
(Updates with context from fifth paragraph.)
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