Survey respondents over-estimated current levels of inflation in February’s poll of the general public, but they were more optimistic than the Bank of England in projections for the year ahead.

The latest Bank of England Inflation Attitudes Survey found the public estimated inflation at 4.9% in February, while official figures put the real figure at 3% in the most recent data, which was for January.

Yet looking ahead, survey respondents expect inflation of 3.2% over the next year, even though the Bank itself has forecast a rise of 3.7%.

When asked about the future path of interest rates, 34% of respondents expected rates to rise over the next 12 months, up from 33% in November 2024.

However, the market is pricing in cuts.

Meanwhile, 23% expected rates to stay about the same over the next twelve months, up from 22% in November 2024, and 29% expected rates to fall over the next 12 months, down from 34% in November 2024.

Hargreaves Lansdown head of personal finance Sarah Coles says: “People tend to over-estimate how high inflation is and underestimate how low interest rates are on savings and borrowing.

“It’s not a huge shock: they have busy lives and keeping on top of these things isn’t a huge priority. However, if you’re too far off, you could be in for a nasty surprise.

“When asked to guess what inflation was in February, they knew inflation had fallen, just not how far.

“Meanwhile, when asked to estimate what’s happening with savings and mortgage rates, they assume rates have risen – when in reality, they have actually fallen a little.”