The Bank of England policymakers’ message surrounding forthcoming interest rate rises are being heeded by UK households it would seem – with a report this week claiming that 78% of us now expect rate rises within the next year, with 48% anticipating the upward curve to begin inside six months.
The key points from this month’s Markit Household Finance Index (Data collected August 12-16th 2015) suggests:
- Sharpest deterioration in household finances so far this year
- Over three-quarters of UK households (78%) anticipate a rise in the Bank of England base rate during the next 12 months, up from 62% in July
- August data indicates a further marginal rise in income from employment
- Inflation expectations reach highest level since December 2014
Professor David Miles, who sits on the Bank of England’s Monetary Policy Committee (MPC), told the BBC’s Newsnight programme that he believes that once the rate starts to rise from its historic low 0.5% figure, the ‘new normal’ interest rate would be between 2.5 and3%. Although no specific time frame was given for this estimate.
Meanwhile, the latest CPI inflation figures show that, in spite of continued falls in energy and food prices, there is a tiny amount of inflation in the system – although it was believed there was none – CPI inflation rose 0.1% in July and ‘core’ inflation rose from 0.8% in June to 1.2%.
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The full Markit Household Finance Index report can be downloaded here: http://www.markiteconomics.com/Survey/PressRelease.mvc/0c3be2bedfb64997912abb24d09fed76