RSS feedsEach quarter the Bank of England polls more than 2,000 members of the public to test how confident the public feels about the year ahead – economically speaking.
And the latest, published in December, should give you and your clients pause for thought about prospects for 2007.
Median expectations of the rate of inflation over the coming year were 2.7% (the poll was conducted before news of its rise to 3%), compared with 2.5% in August, suggesting some businesses have perhaps had their head in the sand on this one.
Indeed, there are pockets of optimism. Around 54% of respondents said the inflation target of 2% was ‘about right’. So there seems to be a degree of confidence that it can be brought back into line.
Okay, but what matters most is the future path of interest rates. And this is a little more worrying. About 72% expected rates to rise in the next 12 months (again this was ahead of this month’s rise), compared with 65% in August. This was the highest response since August 2004, when it was 73%. Just 2% of respondents said interest rates might fall in the next 12 months, the lowest response since the survey began.
Asked what would be ‘best for the economy’ – higher interest rates, lower rates or no change – 14% said rates should go up and 26% down.
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