Bank of England Inflation Attitudes Survey: "For many households the cost of living crisis is alive and kicking"

The fact that people believe inflation is almost five per cent suggests that the cost of living crisis is far from over. In fact, for many households the cost of living crisis is alive and kicking. Fortunately, we are at least expected to get a number of rate cuts in 2025 as the Bank of England seeks to stimulate a struggling economy, as reflected in Friday's October GDP data.

For people to perceive inflation to be more than double what it technically is shows that the cost of living crisis continues. The rate cuts that are expected from the Bank of England in 2025, if not in December, couldn't come soon enough.

What this data shows very clearly is that the impact of the increase in living costs is being felt much more than the Government either realises or cares.

As inflation expectations take root, they threaten to become a self-fulfilling prophecy, sprouting economic anxiety across the nation. While the general public perceives current inflation to be cooling, anxiety over future interest rate hikes is still simmering beneath the surface as rate hike concerns linger. Although the Bank of England's efforts to communicate the easing of price pressures are undoubtedly gaining traction, the number of individuals anticipating interest rates to rise over the next 12 months paints a picture of growing unease about the future trajectory of borrowing costs. These fears are not unfounded, aligning with the OECD’s view that UK interest rates may remain higher for longer than initially anticipated, in part due to measures announced in Chancellor Reeves’ recent Budget. Consequently, this divergence between falling inflation perceptions and rising rate hike expectations presents a complex tableau for policymakers and investors alike.