The latest Bank of England/Ipsos Inflation Attitudes Survey, released in August 2024, provides a vital snapshot of public sentiment regarding inflation and interest rates.
Conducted quarterly, the survey gauges the UK public’s expectations for inflation in the coming years and their views on the Bank’s handling of economic policy. With inflation still a key concern, these insights hold substantial weight for both policymakers and the broader economy.
Public Perception of Inflation
As inflation continues to impact daily life in the UK, understanding how the public perceives future price changes is crucial. The survey reveals that respondents expect inflation to decrease over the coming year.
The median estimate for inflation over the next 12 months was 2.7%, slightly down from the 2.8% expected in May 2024. In terms of long-term expectations, the public anticipates inflation to sit around 3.2% in five years’ time—an increase from the previous figure of 3.1%.
These figures indicate that while there is optimism about the near future, concerns about inflationary pressures persist over the longer term. This trend suggests a level of caution among consumers, which could affect household spending and saving decisions.
Interest Rates and Economic Sentiment
Interest rates are another focal point of public concern. Over half (55%) of respondents stated that interest rates on loans, mortgages, and savings had risen over the past year, reflecting the tightening monetary policy designed to combat inflation.
However, there was a notable shift in expectations, with fewer people (29%) predicting a rise in rates over the next 12 months compared to 34% in May 2024.
Public sentiment about the Bank of England’s control over inflation remains divided. While 45% of respondents felt that the Bank’s inflation target was “about right,” 33% believed it to be too high.
This ambivalence highlights the delicate balance the Bank must maintain between managing inflation and supporting economic growth.
Public Satisfaction with the Bank of England
The public’s satisfaction with the Bank of England’s approach to inflation and interest rates has seen modest improvement.
The net satisfaction balance (those satisfied minus those dissatisfied) rose to 4% in August, up from -4% in May. Although this reflects a positive shift, it’s clear that there’s still room for the Bank to strengthen its public messaging and trust.
Implications for Businesses and Consumers
The inflation expectations detailed in this survey offer essential insight into how consumers are likely to behave. If inflation is expected to remain lower in the short term, businesses may face reduced demand for price hikes, particularly in essential sectors like housing and energy.
Conversely, expectations of higher inflation in the long term might drive wage negotiations and encourage consumers to make larger purchases before prices rise further.
Survey Highlights:
- Median inflation expectations for the next year: 2.7% (down from 2.8%)
- Long-term inflation expectations (five years): 3.2%
- 55% of respondents reported rising interest rates over the past 12 months
- 45% of respondents felt the Bank of England’s inflation target was “about right”
Inflation Expectations |
Aug 2024 |
May 2024 |
|---|---|---|
| Next 12 months | 2.7% | 2.8% |
| Long term (5 years) | 3.2% | 3.1% |
| Expected rate increase (next 12 months) | 29% | 34% |
Future Policy and Planning
The Bank of England closely monitors public sentiment, as reflected in this survey, to shape its future monetary policy. Should inflation expectations continue to decrease, it may offer more flexibility in adjusting interest rates.
On the other hand, businesses must remain agile, using this data to guide pricing strategies and investment decisions in an evolving economic environment.
With inflation and interest rates on the minds of UK consumers, how these attitudes evolve will undoubtedly influence the country’s economic direction in the coming months. The Bank’s next steps will be crucial in maintaining stability while addressing public concerns.
Sources: THX News & Bank of England.
