British Inflation Expectations Rise Amid Economic Challenges

LONDON (Reuters) – The British public’s expectations for inflation in the short term reached their highest level in over a year in February, according to a Citi/YouGov survey on Thursday, highlighting the challenges faced by the Bank of England.

The survey revealed that households’ inflation expectations for the coming year increased to 3.9% in February, up from 3.5% in January, marking the highest level since January 2024. Long-term expectations also rose to 3.9%, up from 3.7%.

Analysts at Citigroup noted that this increase poses a challenge for the Monetary Policy Committee. The Bank of England (BoE), which maintained interest rates at 4.5% on Thursday, is monitoring inflation expectations along with other economic price pressure indicators.

The BoE’s minutes stated, “These increases could be broadly explained by households responding to actual inflation, particularly concerning visible prices like food and energy, and represent an upside risk to future wage and inflation dynamics.”

Additionally, the BoE/Ipsos measure showed that households’ inflation expectations for the upcoming 12 months rose to 3.4% in February, the highest since August 2023. Furthermore, the central bank reported a slight increase in its Decision Maker Panel survey concerning businesses’ expectations for consumer price inflation at the start of the year.