Consumers are significantly overestimating the rate of inflation with the majority believing inflation is 4.4 per cent.
Inflation currently stands at 2.7 per cent and has maintained this rate for the past four months. Forecasters expect inflation will remain above its two per cent target for the next two years.
The figure comes from the Bank of England/ GfK NOP quarterly inflation survey which questions almost 4,000 people.
However, respondents expected inflation to fall to 3.6 per cent within the next year. They also expected it to stand at 3.6 per cent in five years time.
Some 71 per cent of people said they thought Britain's economy would be weakened if prices started to rise faster.
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Regarding interest rates, 29 per cent thought rates had gone up while 14 per cent thought they had gone down. Interest rates have been held at 0.5 per cent for the past four years.
Some 36 per cent of respondents said they expected interest rates to rise over the next 12 months.
Asked what would be best for the economy, 37 per cent thought interest rates should be held while 15 per cent thought they should go up and 22 per cent though they should go down.
But when asked what would be best for them personally 29 per cent of people wanted rates to go down. Some 25 per cent wanted rates to be held and 20 per cent wanted them to go up.

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