Only a third predict rate rise in next six months

A small minority of respondents (12%) expect tighter monetary policy within the next three months – the lowest proportion since June. Likewise, fewer households anticipate a rate rise within the next six months (34%). This was down from 42% in September and much lower than August’s recent high of 48%.

On a 12-month horizon, roughly two-thirds of panellists foresee a rise in the Bank of England base rate. This was down sharply from 78% in August. Nonetheless, the vast majority (85%) remain confident that we will see tighter monetary policy inside the next two years.

Overall, the October data signalled renewed pessimism among UK households regarding the outlook for financial wellbeing over the next 12 months, with financial expectations downbeat for third time in past four months.

Philip Leake, economist at Markit, said:

“UK households’ financial pressures showed little sign of fading in October, according to Markit’s latest HFI survey. The financial strain was more pronounced than that seen throughout much of 2015 so far.

“Similarly, financial expectations for the coming year were downbeat, reversing the trend seen in the prior month. Pessimism was seen despite positive factors such as rising pay and ‘noflation’, suggesting that the underlying fragility of the recovery continues to undermine financial wellbeing.

“Looking at interest rates, households were less likely to expect any imminent action from the Bank of England. Just 34% of respondents expect higher interest rates within the next six months, whereas almost half forecast tighter monetary policy over the same period in August.”