(Bloomberg) -- Britons expect interest rates to fall for the first time in almost 16 years, according to a Bank of England survey, in a sign that households are growing more optimistic.
The quarterly Inflation Attitudes Survey found 38% of respondents expect rates to come down in the next 12 months while 29% anticipate a rise. It was the first time since November 2008, when the financial crisis was raging, that the public on balance expected borrowing costs to ease.
Public confidence in the BOE has also recovered. For the first time since February 2022, in the early days of the inflation shock, more respondents were satisfied that the BOE was successfully controlling inflation.
The survey was conducted between Aug. 2 and Aug. 6, just after the BOE cut rates for the first time since the pandemic in early 2020. At the time, recorded inflation was at the bank’s 2% target. It has since risen to 2.2% but is well below the double-digits levels posted just 18 months ago.
The BOE survey saw a further drop in near-term inflation expectations, with consumer prices expected to rise 2.7% over the next 12 months. That’s the lowest reading in three years.
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The responses are good news for the new Labour government as it seeks an economic bounce, as rates cuts lower mortgage costs and give consumers more money to spend. Consumer spending is vital for growth because it accounts for around two thirds of gross domestic product.
The survey pointed to a recovery in consumer confidence as 42% of respondents said cuts would be “best for the British economy” and 33% said they would be best for them personally. Only 23% of respondents, presumably those with savings, said they wanted higher rates.
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