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2025-12-12 17:36:12
[Inflation Clouds and Interest Rate Puzzles: A "Confidence Crisis" is Unfolding at Central Banks] ⑴ A recent Bank of England survey shows that the median public expectation for inflation over the next year is 3.5%, slightly lower than August's 3.6%, while the median perception of the current inflation rate has also slightly decreased from 4.8% to 4.7%. ⑵ Despite the easing of short-term inflation expectations, the median expectation for longer-term (five years from now) inflation remains high at 3.7%, slightly lower than August's 3.8%, but still well above the central bank's target level. ⑶ Notably, a high 38% of respondents expect interest rates to rise in the next 12 months, a significant increase from 33% in August, while the proportion expecting interest rates to fall has decreased from 29% to 25%. ⑷ Public confidence in the inflation target is wavering, with the proportion believing the target is "roughly appropriate" falling from 38% to 36%, while a high 74% of respondents believe that accelerating price increases will ultimately weaken the economy. (5) There is a discrepancy between the actual situation and public perception. The survey shows that 38% of respondents believe interest rates have risen in the past 12 months, while the proportion who believe they have fallen has dropped sharply from 35% to 26%. This may strengthen expectations of future interest rate hikes. (6) This survey reveals a key contradiction: While the central bank may be about to cut interest rates, the public, due to their personal experience with high inflation, generally expects interest rates to continue rising. This poses a challenge to the transmission and communication of monetary policy.
