UK expectations for rate hikes lowest on record: BoE

[LONDON] The proportion of British people who think the Bank of England will raise interest rates over the next year has plunged to record low, reflecting the central bank's decision to cut borrowing costs after Britain's Brexit vote in June, a BoE survey showed.

The BoE said 21 per cent of people surveyed in August expected the central bank to raise rates in the next 12 months, down from 41 per cent in May, the lowest level since the survey began in 1999.

Nineteen per cent of respondents thought the BoE would cut rates in the coming year, up from just 5 per cent in May and the highest level since November 2008.

The Bank cut interest rates to a record low of 0.25 per cent on Aug. 4 and has said it expects to cut them again later this year if the economy slows as it has forecast because of the shock result of the European Union referendum.

The Bank of England's poll of 2,177 people aged 16 and over was conducted between Aug 8 and 9, a few days after the central bank's rate cut decision which was backed up by other measures to stimulate Britain's economy.

The poll showed a modest increase in the public's expectations for inflation in the coming year which rose to 2.2 per cent from 2.0 per cent in the previous survey in May.

Expectations for inflation in two years' time were unchanged at 2.2 per cent while expectations for inflation in five years'time fell to 3.0 per cent from 3.4 per cent in May.

Annual consumer price inflation stood at 0.6 per cent in July but is widely expected to rise sharply as the fall in the value of sterling triggered by the Brexit vote pushes up the cost of imported goods.

REUTERS