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Nine out of ten consumers predict higher inflation

03/03/2008

A new survey published today shows that people are increasingly worried about rising inflation, and believe that prices will continue to go up.

The February edition of Lloyds TSB Corporate Markets' Consumer Barometer found a massive majority believing that inflation has risen sharply since last year (a balance of 86 per cent).

It also found that a balance of 87 per cent believe prices will continue to go up in the coming months.

Moreover, the survey found that more consumers believe that interest rates will be higher this time next year than they are now (31 per cent).

"These findings demonstrate just how difficult a challenge the Bank of England is currently facing. With consumers clearly feeling the pressure of high prices, there is a need to put the breaks on inflation," said Trevor Williams, chief economist at Lloyds TSB Corporate Markets.

"But this must be balanced with the need to manage the risk of an economic downturn with further interest rate cuts."

With the US Federal Reserve making its plans for sharp interest rate cuts clear in recent days – following the dollar's slump to record lows against many major currencies – some had hoped the Bank of England to pursue a similar path.

However, a majority of commentators believe that the Monetary Policy Committee will leave interest rates at 5.25 per cent when its decision for March is announced later this week.