Waning public confidence in UK central bank’s ability to control inflation

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “The public’s confidence in the Bank of England’s ability to control inflation continues to wane – a finding that could increase pressure on the UK’s central bank, which has come under fire for failing to predict the scale and persistence of inflation. Market sentiment suggests that the Bank of England are odds on to increase interest rates to 5.5% next week, in a bid to further curb price increases.

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“While the public’s expectations on inflation by August next year is broadly in line with the BoE’s own forecast, when asked about expectations of inflation in five years’ time, respondents gave a median answer of 2.9%. The reality is no one short of a functioning crystal ball could provide an accurate answer, but the fact that respondents gave an average figure that is almost one percentage point higher than the 2% target is hardly a vote of confidence in the BoE’s ability to keep a handle on inflation.

“Higher interest rates have resulted in acute mortgage pain for homeowners who have recently come off fixed-rate deals – many of whom have seen their monthly repayment go up by hundreds of pounds. It is little wonder then that there is an increase in the number of people who said it would be better for them if interest rates decreased.  

“A number of factors can lead to an overestimation or underestimation of the true rate of inflation in their daily lives. When prices are running high, it is important to understand your financial position, looking at your expenditure and income to gauge the true impact of rising prices on your finances, instead of letting your perception of inflation run away with your wallet.”