Bank finds the public expects another rate rise

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The Independent Online

A majority of households are braced for another rise in interest rates, according to the latest Bank of England poll of consumer attitudes published today.

About 7 out of 10 people think rates will rise, compared with just 36 per cent who feared an increase in August, a survey of 2,000 people showed. In contrast only 5 per cent now think they will fall.

The swing in opinion is probably driven by the speculation surrounding the Bank's rate increase last month, its first for almost four years.

The survey result will probably please the Bank's Monetary Policy Committee, which is hoping consumers can be discouraged from the current spending and borrowing boom without the need for too many more rate rises.

They are worried that with debt levels running at record highs, substantial rate increases could trigger a financial and economic crisis if house prices fall and households suddenly stop spending.

More than a fifth, 22 per cent, now believe that the MPC should raise rates again, the highest in the series and compared with a series average of 14 per cent.

When asked what would be best "for you personally", 20 per cent said rates should rise compared with 23 per cent in the August poll, while 30 per cent said it would be better if they fell, compared with 28 per cent in August.

The poll also boosted hopes that the Bank will be able to manage the switch of the inflation target from 2.5 to 2 per cent announced in last week's pre-Budget report.

Mervyn King, the Bank's Governor, had warned that the change would be difficult to explain to the public. However, the survey shows that support for the current target has fallen to 51 per cent from 61 per cent over the past 18 months. Of those who think the target is wrong, a majority believe it is too high.