UK Inflation Expectations Ease: Survey

Inflation expectations among British households have declined, according to a Citi and YouGov survey. Expectations for inflation in a year's time fell to 3.5% in January, with longer-term expectations easing as well. However, experts caution that concerns remain as inflation dynamics stay uncertain.

Inflation expectations among British households have shown a decline, breaking a pattern of increases, as reported in a survey by Citi and YouGov. According to the January survey, the projected inflation rate in a year's time dropped to 3.5% from the previous month's 3.7%. In the longer term, spanning five to ten years, expectations eased to 3.7% from 3.9%.

The Bank of England, which holds the prospect of adjusting interest rates, closely monitors such inflation expectations as part of gauging economic price pressures. Citi's survey results were viewed as a relief after a period of rising expectations, suggesting a stabilization in inflation expectations.

Despite the relief, concerns persist over the level of these expectations. Citi economist Benjamin Nabarro noted the prevailing anxiety due to previous supply shocks, emphasizing that future viewing of economic news might lead to an inflationary interpretation. With headline inflation predicted to rise sharply, uncertainties around underlying inflation dynamics are likely to continue for several months, he warned.

(With inputs from agencies.)