Britons ‘expecting higher inflation’

Britons tend to expect Consumer Price Index (CPI) inflation to remain well above the government's official target rate of two per cent.

But rather than getting into more debt to pay for goods, 54 per cent said they would cut back, something that could help consumers

These were among the key findings of the latest Bank of England/Gfk NOP Inflation Attitude Survey, which revealed the median expectation for CPI inflation in the coming year is 3.5 per cent, with 2.9 per cent anticipated in the following 12 months.

And the average expectation for the next three years is 3.2 per cent.

On the one hand, these figures have notably come down since the last survey, which took place in November.

For example, on that occasion the rate for the year ahead was tipped to be 4.1 per cent, the following year 3.4 per cent and the five-year outlook 3.5 per cent.

And more people declared themselves satisfied with the way the Bank has handled inflation through its monetary policy, with 20 per cent more backing their approach than being disappointed with it, up from a net satisfaction rating of only nine per cent in November.

But even so, the expectations are clearly higher than the target rate and in such a case, consumers may be more likely to cut back.

While this may help some to get debt free by ensuring they do not respond to the situation by loading the extra costs onto credit cards, subdued consumer spending could lead to retail job losses and cause some working in the sector to suffer debt problems through the consequent loss of income.

The Bank's own estimate of how the rate of inflation will change this year – as outlined in its latest Quarterly Inflation Report – published last month – predicted CPI will go on falling this year, although by how much is uncertain.

By James Francis