March 7, 2014 / 9:37 AM / 6 years ago

Britons increasingly see rate rise but lower their inflation forecasts - BoE

LONDON (Reuters) - Britons’ expectations for an interest rate hike over the next year are on the rise even as their inflation forecasts have fallen, a quarterly poll commissioned by the Bank of England showed on Friday.

The Bank of England is seen in the City of London August 7, 2013. REUTERS/Toby Melville

The BoE’s inflation attitudes survey showed that 40 percent of Britons expect a rate rise over the next 12 months, up from 34 percent in November and its highest since May 2012.

However, inflation expectations over the next year fell to 2.8 percent from 3.6 percent and hit its lowest in four years.

Inflation expectations over the next two and five years also fell to their lowest levels since August 2012.

The inflation estimates are likely to support the Bank of England’s message that it is in no rush to raise interest rates.

Britain’s economy staged a faster-than-expected rebound last year, forcing the Bank in February to revise its forward guidance policy, designed to signal no quick tightening of monetary conditions.

At the time, the Bank also hinted at a first rate rise in the second quarter of 2015. Some Bank officials have since suggested that it could come sooner if inflation pressures are bigger than expected or wages rise faster than anticipated.

But the economy is still 1.4 percent below its 2008 peak and consumer prices are just now below the BoE’s 2 percent target, leaving the central bank under little pressure to raise rates.

The rising expectations for interest rates shown in Friday’s survey suggests Bank Governor Mark Carney has to continue convincing markets and the public that the Bank is happy to keep interest rates at record lows for a while longer.

The survey was carried out for the Bank by polling company GfK NOP, which surveyed 3,949 people between Feb 6 and 18.

Reporting by Ana Nicolaci da Costa and William Schomberg

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