Expectations of future inflation have become less "firmly anchored" around the Bank of England's two per cent target than in the recent past.

The Bank sees this as a pointer to future pay pressures and therefore a key factor in setting interest rates.

Yesterday it published a survey showing that public expectations for inflation over the coming year centred around 2.7 per cent - up sharply from 2.2 per cent last November - and the highest finding since the quarterly survey began seven years ago.

Of 3,939 people questioned by NOP for the Bank, 38 per cent said they expect inflation to exceed three per cent in the next 12 months, while only 28 per cent think it will be less than two per cent.

That reversed the position in November when 40 per cent were looking for under two per cent and 27 per cent for three per cent or more.

This time, another 16 per cent said they expect prices to rise by five per cent or more, up from ten per cent in November.

Official numbers tomorrow should show the extent to which the recent surge in gas prices has fed through into wider inflation. But these figures for the Consumer Price Index for March will not show the effect of the pre-Easter jump in petrol prices.

The survey also shows that most people over-estimate inflation in the recent past.

It was conducted during February, when inflation measured by the CPI stood precisely on the Bank's two per cent target and the more familiar Retail Prices Index, used as a benchmark by most pay negotiators, was 2.4 per cent up year-on-year.

Yet 39 per cent of the sample thought prices had risen by three per cent or more - 16 per cent by five per cent or more - while 27 per cent put inflation at under two per cent.

Only one in five of the respondents plumped correctly for "two per cent but less than three per cent".

The Bank could find consolation in widespread support for its inflation-targeting policy. By a margin of 54 per cent to eight per cent the respondents said the economy would end up weaker rather than stronger if prices start to rise faster.

Similarly, 57 per cent described themselves as very or fairly satisfied with the way the Bank is doing its job to set interest rates to control inflation. Only eight per cent were dissatisfied. Both results were in line with surveys over the past year.

There was also substantial support for Chancellor Gordon Brown's target - 56 per cent thought two per cent was "about right".

Asked about the future path of interest rates, 47 per cent said they expect rates to rise in the next 12 months, against 46 per cent in November and a four-year low of 34 per cent last August - the month the Bank cut its rate from 4.75 per cent to the present 4.5 per cent.

Only seven per cent said they think rates will fall in the next 12 months, down from 11 per cent in November and 18 per cent in August. Another 28 per cent expected the cost of borrowing to remain "about the same", in line with the previous two surveys.

Asked it it would be best for the British economy for interest rates to go up, or down, over the next few months, 11 per cent favoured an increase, while 18 per cent said they would benefit personally.