Confidence in Bank of England plummets to all-time low

Public confidence in the Bank of England has plummeted to a record low amid growing doubts about its handling of the economy.

Two in five Britons (around 40 percent) think the central bank is doing a poor job of controlling inflation, according to their own household survey by market researcher Ipsos.

Only 19 percent are satisfied with their performance. This gives a net satisfaction rating of -21 percent, the lowest since records began in 1999. The findings suggest that the Bank, led by Governor Andrew Bailey, has lost public confidence by aggressively raising interest rates. interest, after having seen inflation. spiral until reaching a maximum of 40 years.

The Bank is widely expected to raise rates to 5.5 percent next week, having raised them from 0.1 percent in December 2021 to 5.25 percent, a 15-year high. But according to bets in financial markets, that will be the last rate hike of the year, and the central bank is inclined to pause and evaluate the impact of 15 successive increases.

Interactive Investor’s Myron Jobson said: “Public confidence in the Bank of England’s ability to control inflation continues to decline, a finding that could increase pressure on the UK central bank, which has been criticized for failing to predict the scale and persistence of inflation Market sentiment suggests the Bank is likely to raise interest rates to 5.5 percent next week in a bid to further curb price increases.

Investors are divided on whether there will be further rate hikes in early 2024 before falling back to 5% in the second half of the year.

Although inflation has fallen from a peak of 11.1 percent in October last year, it remains high at 6.8 percent, well above the Bank’s 2 percent target.

Official figures next week are expected to show it rose again in August due to rising oil prices. This will present a headache for the Bank amid warnings that large interest rate increases risk pushing the economy into recession.

Official figures this week showed the economy contracted 0.5 percent in July, although this was partly due to strikes by doctors and teachers and wet weather.

Paul Dales, chief economist at Capital Economics in the UK, said: “We believe that a rise in interest rates from 5.25 per cent to 5.5 per cent on Thursday will be the last increase in this cycle and that inflation persistent will force the Bank to maintain rates”. at its peak until the end of 2024.

“But when rates are eventually cut, we suspect they will come down further and faster than investors expect.”