LONDON, Aug. 3 (Reuters) – British public inflation expectations for the coming year surged in July in response to the recent price hike, although long-term expectations remained stable, a monthly survey.
The Citi / YouGov survey showed that public inflation expectations for the next 12 months rose to 3.1% in July from 2.8% in June, placing this measure still above its long-term average. term but below the December peak of 3.8%.
UK consumer price inflation hit a three-year high of 2.5% in June and the Bank of England is expected to raise its short-term inflation forecast on Thursday, although it is likely to point out that the increase will be temporary. Read more
Longer-term inflation expectations for the next five to ten years have held steady at 3.4%.
Citi said the rise in near-term price expectations likely reflected fears of an increase in household energy bills later this year, as well as the recent faster-than-expected rise in the CPI due to the rising oil prices and post-COVID supply chain bottlenecks.
The BoE could take some comfort from the fact that this had yet to fuel longer-term inflation expectations, but should ensure that higher headline inflation later in 2021 does not push price expectations long term on the rise.
“A sharp increase here could still force the bank to tighten policy even if the recovery is incomplete,” Citi said.
The BoE views public inflation expectations as a guide to how companies will set prices and to what extent workers will push for larger wage increases.
The survey also showed that an above-average percentage of respondents said they were unsure of how inflation would move in the future, creating a greater chance of a change in long-term expectations. term, Citi added.
Reporting by David Milliken; Editing by Kate Holton and William Schomberg
Our Standards: The Thomson Reuters Trust Principles.