UK inflation expectations match nine-year high: BoE survey

The British public’s expectations for inflation over the next one to two years rose to their joint-highest level in nearly a decade and satisfaction with the Bank of England slid, according to a quarterly BoE survey.

Central bankers watch surveys of inflation expectations closely for signs that people and businesses expect above-target inflation to become entrenched, influencing wage-bargaining and pricing strategies - though not all officials are convinced the data offer a meaningful guide to future behaviour.

Friday’s survey showed that the public’s expectation for inflation in the next one to two years rose to 3.4 per cent in November from 3.2 per cent in August, matching a May reading which was the highest since November 2013.

British consumer price inflation hit a 41-year high of 11.1 per cent in October, more than five times the BoE’s 2 per cent target.

Net public satisfaction with the job the BoE is doing in controlling inflation fell to -12, its lowest since the survey began in 1999, down from -7 in August.

Not all the survey measures were so negative, however.

Expectations for inflation in five years’ time rose to 3.3 per cent in November from 3.1 per cent , but were below May’s two-and-a-half year peak of 3.5 per cent and not much above their long-run average of 3.2 per cent .

Expectations for inflation over the year ahead declined to 4.8 per cent from August’s record-high 4.9 per cent .

In September, Britain’s government announced measures to limit future rises in household energy bills.

Some other measures of inflation expectations have shown more of a decline in expectations than the BoE survey. A survey by Citi and YouGov, conducted on Nov. 22 and Nov. 23, showed inflation expectations for five to 10-years’ time had fallen to 3.9 per cent in November from a peak of 4.8 per cent in August.

The BoE survey took place from Nov. 4 to Nov. 7, just after the BoE raised rates by three quarters of a percentage point to 3 per cent . Next week the BoE is likely to raise rates by a further half point to 3.5 per cent , according to a Reuters poll of economists.

• Business