The Bank of England undertakes a quarterly survey of public attitudes towards price inflation.
The latest survey was conducted in November, and the results have now been published.
Respondents believe the current rate of inflation is 3.2%, with expectations that the rate of inflation would be 2.4% over the coming year.
The Consumer Price Index (CPI) measure of price inflation has an annual rate of of 1.9%, up from 1.5% in October. Along with other analysts, we expect to see a short term spike in price inflation in the New Year, partially as a result of VAT returning to 17.5% from 15%.
54% of respondents thought the inflation target was ‘about right’. 20% said the inflation target was ‘too high’.
The Bank of England has an inflation target, to ensure price stability, of 2%. If the target is missed by more than 1 percentage point on either side, the Governor of the Bank must write an open letter to the Chancellor explaining the reasons why and what actions the Bank proposes.
Looking at interest rate attitudes, 25% of respondents said interest rates should ‘go up’ when asked what would be ‘best for you personally’. 24% thought rates should ‘go up’, when asked what would be ‘best for the economy’.
The Bank Rate was reduced to the current historic low of 0.5% in March 2009. Assuming the rate of inflation follows expectations in 2010, we do not expect to see significant interest rate increases next year.
