The Bank of England’s Monetary Policy Committee (MPC) is facing one of its toughest challenges to date, as consumer confidence levels in its ability to reduce inflation fall to record lows. The Bank’s quarterly survey of inflation, released yesterday, has revealed that net satisfaction in the Bank’s attempts to reduce inflation stands at just 22 per cent, the lowest since its records began in 1999.

According to the results, consumers believe inflation has now hit five per cent, a whopping three per cent above the Bank’s target rate of two per cent. The official measure of inflation, the Consumer Price Index (CPI) currently stands at three per cent but is due to be updated on Tuesday.

The Bank of England’s governor, Mervyn King, had a narrow escape last month as inflation sat at three per cent; if it hits 3.1 per cent or higher, the Chancellor Alistair Darling will be expecting a letter from the Bank detailing reasons for the increase. This is indeed a forewarning to all those seeking refuge from lending institutions, as the cost of borrowing will be on the rise. Consumers are now forced to approach a loan with a warning.