(Bloomberg) — British households are growing more optimistic that inflation is cooling and interest rates have peaked, according to a Bank of England survey.
It found that consumers expect prices to rise by 3.3% over the next 12 months, the lowest predicted inflation rate in two years before the war in Ukraine sent energy and food bills soaring. It was down from 3.6% when the survey was last conducted in August.
The quarterly Inflation Attitudes Survey also suggested that the BOE’s higher-for-longer messaging is seeping into the public consciousness with fewer people expecting rates to rise than at any time since the central bank began its hiking cycle at the end of 2021.
Some 44% expect rates to rise over the next 12 months, down from 63% in August. It was the biggest drop since the aftermath of the Brexit referendum in 2016.
The central bank has guided markets and households toward a “Table Mountain” strategy where rates stay stable at high levels for a prolonged period.
Growing hopes that the BOE has ended its fastest rate-hiking cycle since the 1980s is breathing new life into the housing market. Buyers are tentatively returning and surveys from lenders show prices are edging higher again, suggesting property will escape the crash that had appeared possible when mortgage rates started to soar last year.
Moneyfacts said on Friday that the average rate on a two-year fixed deal has slipped below 6% for the first time since mid-June.
Greater public optimism is also delivering a dividend for the BOE, with those saying they are dissatisfied with the way the bank is doing its job falling to 34% from a record 40% in August. Still, only 21% declared themselves satisfied.
The struggle to bring inflation from double digits back to its 2% target has seen trust in the BOE evaporate. Governor Andrew Bailey has denied accusations, including from Members of Parliament and the media, that officials were too slow to get a grip on inflation when it started to take off.
Net satisfaction in the BOE has plunged from +30% shortly before the pandemic to a low of -21% in August. It was at -14% in November.
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