The general public believes the rate of inflation is as high as 5.4 per cent but the majority would still like to see an interest rate cut, a survey has shown.

Officially, the current rate of inflation is 4.4 per cent but it is expected to rise when the latest figures are made public next Tuesday.

Asked what would be ‘best for the economy’ – higher interest rates, lower rates or no change – nine per cent thought rates should ‘go up’, 40 per cent thought that interest rates should ‘go down’ and 28 per cent thought interest rates should ‘stay where they are’.

However, public awareness about the dangers of inflation appears to be increasing.

By a margin of 76 per cent to three per cent, survey respondents believed that the economy would end up weaker rather than stronger if prices started to rise faster.

This margin was the widest since the survey began in November 1999.

The Bank of England and GfK NOP’s inflation attitude survey assesses the public’s feelings about inflation and the interest rate every quarter and the results are an important economic indicator.

If people believe inflation is high, this affects wage negotiations and wage setting across the country, so a perception of high inflation can become a self-fulfilling prophecy.

The Bank of England’s monetary policy committee, which sets the interest rate on a monthly basis, is also losing its credibility in the face of the credit crunch.

When asked whether the Bank of England is ‘doing its job to set interest rates to control inflation’, the net satisfaction index – the proportion satisfied minus the proportion dissatisfied – was 18 per cent, compared with 22 per cent in May.

This was the lowest net satisfaction index outturn since the survey began, the Bank said.