The British public expects the cost of living to soar at more than double the rate of official targets in the coming year, according to the Bank of England’s latest survey of inflation expectations.

Most respondents forecast the average rate of inflation at 4.3 per cent in the next year, more than double the 2 per cent target, according to the Bank’s quarterly attitudes survey.

The perception makes it less likely that the Bank of England's Monetary Policy Committee (MPC) will cut interest rates at its next monthly meeting. The MPC is concerned that an extended period of rising consumer price inflation, caused by higher utility and food prices as well as a weaker pound, could lead to a long-lasting rise in inflation expectations.

These could then fuel higher wage demands and increasing inflation risks.

The results of the survey reflect the growing pressure on the public from surging petrol, food and energy costs at a time when banks, hit by the credit crunch, are raising mortgage rates.

The survey put average estimates of the rate of inflation at 4.9 per cent, compared with its present level of 3 per cent.

Experts at Capital Economics, said: "While the link between the public’s inflation expectations and wider inflationary pressures is uncertain to say the least, these figures will reinforce fears that the next move in interest rates could be up."

Howard Archer, chief UK and European Economist at Global Insight, said: "We still believe that the ultimate next move in interest rates will be down, but the sharp rise in inflation expectations in May reinforces our view that the Bank of England will not be prepared to relax monetary policy for many months to come."

The MPC was also given a cue for a possible rise in rates after more than half of respondents said it would be better to raise borrowing costs than let prices in shops rise more quickly.

Nearly half of respondents expect interest rates to rise over the coming year.

The Bank kept interest rates on hold at 5 per cent last week, despite growing evidence of an economic slowdown as it grapples with price pressures from record oil prices.

The minutes of its May meeting - when borrowing costs were also left unchanged - warned that lower rates “would make it more difficult to keep inflation expectations in line with the target."

Today’s survey, however, offers more evidence that inflation expectations are spiralling, despite the recent programme of cuts by the Bank, which reduced interest rates three times between December and April.

Mr Archer said: “We suspect that November is now likely to be the earliest month for a cut unless the economy really falls off a cliff over the summer.”

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