Public confidence in the Bank of England has hit its lowest point since 2000, a survey has revealed.

The Bank's inflation attitudes survey shows the public have little trust in the institution after a series of interest rate hikes over the past 18 months.

The study also found that many believe inflation is running at 3.2%, well above the official Consumer Price Index figure of 2.1%.

Those questioned also think inflation will rise throughout the coming months, expecting it to hit 3% in 2008.

This figure is not only well above the Bank's predicted 2% target, but also a record estimate for the study.

Such predictions could go on to pose problems for the Banks' Monetary Policy Committee, as expectations of higher prices often filter into wage demands.

Interest rates are also a big issue for the 2,000 people quizzed by the Bank, with 39% claiming it is time to cut rates to ease the cost of borrowing.

Some 52% of those who took part in the survey - which was conducted before the Bank cut interest rates by 0.25% this month - also believe rates will continue to rise next year.

It signals a gloomy time for the Bank of England, which has already predicted slow economic growth for 2008.

The MPC is expected to lower rates again in February, but experts have warned this could fall through if the Bank is still worried about inflation.

Global Insight's chief UK economist Howard Archer said the survey will make "uncomfortable reading" for members of the MPC.

He said: "With the critical early 2008 pay rounds looming and the labour market currently still tightening, the Bank will be particularly concerned that higher inflation perceptions and expectations will fuel markedly increased pay demands and settlements.

"The Bank will be very wary of the risk of a wage-price spiral developing."

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