LONDON: United Kingdom consumers are more pessimistic about inflation than at any time since the financial crisis, piling pressure on the Bank of England (BoE) to raise interest rates at its meeting this week.

       Britons see prices in the shops surging by 4.3% in the next 12 months, the highest reading since 2008, according to the BoE’s inflation attitudes survey published recently.

       The figure was up sharply from 3.2% in November, and even in five years inflation is expected to be well above the BoE’s 2% target.

       Satisfaction with how the central bank is doing its job fell sharply in February.

       With inflation at a 30-year high and expected to accelerate further as the war in Ukraine drives up energy prices, the figures are likely to worry the nine-member Monetary Policy Committee.

       Elevated expectations are pushing up wage settlements, and fears that this could entrench higher prices have already driven consecutive rate hikes.

       Policy maker Michael Saunders said recently that “inflation expectations are not as well anchored as I would like,” having voted for a 50 basis-point rise in February.

       Catherine Mann said that “the policy strategy is very much a ‘front load’ to counter expectations.”

       Separate data from the Office for National Statistics (ONS) also strengthened the case for a BoE rate rise. They showed that the economy is bigger than before the pandemic after growing at the strongest pace in seven months in January.

       Gross domestic product (GDP) rose 0.8%, more than economists expected, as the Omicron variant of the virus dented output less than feared. Further gains for the economy are expected in February, when Covid-19 cases fell.

       That will ease worries that tightening monetary policy too aggressively will hamper the recovery.

       However, economic headwinds are mounting, with the surge in energy prices triggered by the war in Ukraine set to deliver a massive blow to living standards this year.

       That may leave rate setters cautious about going beyond a 25-basis-point hike in March.

       “The emergence of the Omicron variant of Covid-19 proved little more than a blip for the UK economy, which posted an unexpectedly rapid rebound in January.

       “Growth is on course to exceed the BoE’s latest forecast for the first quarter by a huge margin, providing even more reason to lift rates again this week,” said Bloomberg Economics’ Dan Hanson.

       It had been widely reported that the British economy grew 7.5% in 2021, rebounding from its historic 9.4% plunge in 2020 when pandemic restrictions had stifled activity.

       On a quarterly basis, the GDP was estimated to have increased by 1% in the final three months of the year.

       It followed a downwardly revised 1% increase the previous quarter, the ONS had said. — Bloomberg