The Financial Express

UK inflation expectations hold steady despite recent price climb: BoE

| Updated: October 22, 2017 16:22:26

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The British public’s expectations for inflation remained stable in the three months to early August, a Bank of England survey showed on Friday, despite this year’s rise in price growth after the Brexit vote.


The BoE said median expectations for inflation in a year’s time held steady at 2.8 per cent while expectations for inflation two years out edged down to 2.7 per cent from 2.8 per cent in the previous survey which was conducted in May.


Inflation in five years’ time was seen at 3.4 per cent, compared with 3.3 per cent three months earlier, returning to a peak last seen in May of last year.


Britain’s inflation rate broke through the BoE’s 2.0 per cent target earlier this year as the fall in the value of the pound since the Brexit vote in 2016 pushed up the price of imports.


British consumer price inflation held steady at 2.6 per cent in July after reaching 2.9 per cent, its highest level in nearly four years, in May.


The central bank last month predicted inflation would peak at nearly 3.0 per cent in October although since then sterling has weakened further against the euro, meaning the pressure on prices from the weak currency may persist for longer than the BoE thought.


But most economists polled by Reuters last week said they expected the BoE to keep its benchmark interest rate at a record low of 0.25 per cent until 2019 as the country goes through the process of leaving the European Union.


In the BoE survey published on Friday, 32 per cent of respondents said rates might stay about the same over the next 12 months, compared with 31 per cent in May. Forty-two per cent of respondents expected rates to rise over the next 12 months, unchanged from May.


The BoE is due to make its next statement on interest rates on Thursday of next week.


The BoE’s data was based on a survey of 2,096 people conducted by polling company TNS between Aug. 4 and 8.

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