More Brits than ever have no idea where rates are going

December 5, 2014

Bank of England Governor Carney listens during the bank's quarterly inflation report news conference at the Bank of England in London

So much for forward guidance. More Britons have no idea where interest rates are heading than since records began 15 years ago, according to the latest Bank of England/GfK NOP survey.

The poll of almost 2,000 people showed Britain’s public last month scaled back expectations that the Bank will raise rates from their record low 0.5 percent, where they’ve been for nearly six year. But there was a striking degree of uncertainty lurking underneath the headline findings:

  • 23 percent of Britons had “no idea” where rates are heading over the next 12 months—the highest proportion since the survey started in 1999.
  • 22 percent said they had no idea if it would be best for Britain’s economy if rates went up, down or stayed the same – the highest proportion since August 2000.
  • 15 percent of respondents said they had no idea if would be best for them personally if rates went up, down or stayed the same – the highest proportion since the survey started.
  • 21 percent said they had no idea if the BoE’s 2 percent inflation target was the right level or not – the highest proportion since November 1999.

Policymakers have been hammering the message that when interest rates eventually rise, they will do so gradually and to lower levels than before the financial crisis.

They will therefore be comforted by the fact only 5 percent of Britons expect rates to rise a lot over the next year (although it’s been around that level since late 2012 – before the introduction of forward guidance). In a separate question, 40 percent said it would be best for the economy if rates stayed where they are.

BoE Govenor Mark Carney has staunchly defended the policy. He told lawmakers last month:

“Interest rates are likely to go up. It is a question of timing and degree as this recovery moves forward and we do want that message to get to households … There are some signs in terms of household behaviour, you see some of it in the housing market, that that message is being increasingly understood.

But as today’s survey showed, growing numbers of Britons have been left increasingly confused.

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