A third interest rate hike despite the BoE’s dissatisfaction


Some 31% of people believe it is better for them personally if interest rates rise despite their dissatisfaction with the way the Bank of England (BoE) is using this tool to control inflation.

The central bank’s quarterly survey of attitudes towards inflation of 2,238 British adults conducted between August 5 and August 8 found that a quarter wanted rates to fall while 21% wanted they remain as they were. The survey came a day after the base rate rose to 1.75% amid warnings of a possible recession.

When asked how the BoE is ‘doing its job to set interest rates to control inflation’, respondents’ score was negative 7%, down from minus 3% in May, suggesting worsening of the feeling of satisfaction.

Some 31% of respondents said the central bank’s 2% inflation target was too high, while 32% said it was “about right”. Just over a fifth thought it was too low.

When asked which direction would be best for the economy, 30% of respondents said an increase, compared to 28% who said the same in May. Almost a quarter (24%) said rates should fall, down from 22% in May. A further 26% said they should stay as they are, up from 28% previously.

Consumers affected by mortgages and rising prices

As for rates for mortgages, bank loans and savings, 73% noticed that they had increased over the past 12 months.

Going forward, just over a third expect rates to rise “a lot” while 41% predict a slight increase. Only 11% of people thought they would stay the same.

More than half (58%) of respondents said prices had risen by at least 5% in the past 12 months, and two-fifths expected them to rise further by the same margin.

Further on, a fifth will feel prices fall by 5% in two years.

Two-thirds said if prices were to continue rising, the UK economy would weaken. Only a tenth thought it would strengthen the economy.

“By no means a glowing endorsement”

Myron Jobson, Senior Personal Finance Analyst at Interactive Investor, said: “The latest survey shows inflation expectations for the year ahead have risen since the last survey. The public also believes inflation will remain high beyond 2023 – although lower than previously thought.

“The Bank is bravely asking the public to judge its effectiveness in controlling interest rates, and their response is by no means a glowing endorsement.”

He added: “It is difficult for many consumers to look beyond the impact of rising prices on their finances today. Inflation hits everyday expenses the most, from the amount we pay for gas and electricity to the food we put on our tables.

“Interestingly, the survey found that almost a third of respondents said it would be better for them if interest rates ‘rise’, but a quarter of the sample said the opposite. , indicating that cost-of-living experiences are polarized.

“The results mount pressure on the Monetary Policy Committee, which is expected to raise interest rates further when it meets next week.”

Shekina is the business writer for Mortgage Solutions. She has over four years of experience in the B2B publishing market, with previous industries including accounting, pets, funerals, hospitality, retail and jewelry. She currently reports mortgage market news and liaises with financial clients to produce sponsored content. Follow her on Twitter at @ShekinaMS

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