LONDON (Reuters) -The British public’s expectations for inflation over the coming year rose in June but long-run expectations eased, according to a survey that will feed into the Bank of England’s next debate about how high it needs to raise interest rates.
Public expectations for inflation in 12 months’ time increased to 5.0% in June from 4.7% in May, the monthly survey by U.S. bank Citi and polling firm YouGov showed.
But expectations for inflation in five to 10 years’ time fell to 3.3% from 3.5%, the fourth consecutive monthly fall and the joint-lowest since April 2021.
The BoE is watching measures of inflation expectations as it worries about price growth pressures in the economy. It stepped up its attempts to bring down inflation to its 2% target – from 8.7% in May – with a bigger-than-expected half-a-percentage-point interest rate increase last month.
Citi said long-run expectations were now back at the top end of the range seen before the COVID-19 pandemic, while short-run expectations were below the very high levels seen in the second half of last year, when consumer price inflation hit a 41-year high of 11.1%.
“Today’s data suggest that while upside risks remain – with both long- and short-term series still somewhat elevated – these broadly remain anchored at target consistent levels,” Citi economist Benjamin Nabarro wrote in a note to clients.
“We expect these data to continue to ease in the months ahead as headline inflation continues to fall back.”
(Reporting by David MillikenEditing by William Schomberg)
