Public has rising expectations for inflation in 2022 – but still behind the Bank of England’s predictions

Jason Hollands, Managing Director of Bestinvest, the online investment service, comments on the latest Bank of England / Kantar Inflation Attitudes survey:

“The latest Bank of England quarterly survey of public attitudes to inflation (published today) reveals that the public’s median expectations of the rate of inflation over the coming year to be 3.2%, up from 2.7% in August 2021. While individuals clearly have growing expectations for rising inflation in 2022, their view on the level is still below the recent remarks from the deputy governor at the Bank of England that inflation will comfortably exceed 5% by next spring.

“While the survey was conducted before the release of the latest available UK inflation data, which indicated that UK Consumer Price Index inflation was 4.2% in October, it is still worrying that the public is not preparing itself for higher inflation. Inflation not only puts a squeeze on household budgets through higher costs such as petrol at the pumps, food and clothing, it is also a silent assassin of wealth, which slowly eats away at the future spending power of cash and investments.

“Those with savings and investments should give careful consideration to the impact of rising inflation. Getting a return that at least keeps pace with inflation, really should be a top priority. Many people hold far too much in cash deposits, earning little in the way of interest given that low interest rates remain in place and the Bank of England may in fact hold out from implementing a hike until next year. With inflation rising, it is worth considering whether your mix between cash savings and longer-term investments is right.”