UK households maintain hawkish stance towards Bank of England monetary policy - Markit

Survey published by IHS Markit on Wednesday showed UK current inflation perceptions picked up for the third straight month in December, with the respective seasonally adjusted index rising to 76.0. The indes was up to a 32-month high and compared to 75.3 in November.

The index for future inflation perceptions showed a similar trend, rising to a 28-month peak of 86.5. However, inflation expectations remained just below the long-run series average of 87.1.

Stronger inflation, along with stagnant pay and an uncertain Brexit agenda stokes households’ worries about the future. Rising inflation expectations over the coming year kept UK households' hawkish stance towards Bank of England monetary policy in December.

The proportion of households anticipating the base rate to be cut rather than raised was down to 15%. That was the lowest since June’s Brexit vote. The proportion of respondents expecting interest rates to rise from their current low of 0.25 percent increased slightly. Over a six-month horizon, around 35 percent forecast tighter monetary policy (up from 33 percent in November). Looking further ahead, more than half (56 percent) see interest rates rising before the end of 2017.

“A greater number of households are expecting the Bank of England to curb inflationary pressures through higher interest rates. Around 56% predict a rise in the base rate before the end of next year, while only 15% anticipate another rate cut.” said Philip Leake, economist at IHS Markit.

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