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The
Citi/YouGov survey showed public inflation expectations for the
next 12 months rose to 3.1% in July from 2.8% in June, taking
this measure further above its long-run average though below
December's peak of 3.8%.
British consumer price inflation hit a three-year high of 2.5%
in June and the Bank of England looks set to raise its near-term
inflation forecasts on Thursday, though it is likely to stress
that the increase will be temporary.
Longer-term inflation expectations for the next five to 10 years
held steady at 3.4%.
Citi said the rise in short-run price expectations probably
reflected fears of higher household energy bills later this year
as well as the recent faster-than-expected rise in CPI due to
higher oil prices and post-COVID supply-chain bottlenecks.
The BoE could draw some comfort from the fact that this had not
yet fed into longer-run inflation expectations, but would need
to be watchful that higher headline inflation later in 2021 did
not push long-term price expectations higher.
"A marked increase here could yet force the Bank to tighten
policy even if the recovery is incomplete," Citi said.
The BoE looks at public inflation expectations as a guide to how
businesses will set prices and the extent to which workers will
push for bigger pay rises.
The survey also showed that an above-average percentage of
people surveyed said they did not know how inflation would
change in future, creating a greater chance of a shift in
long-term expectations, Citi added.
(Reporting by David Milliken; Editing by Kate Holton and William
Schomberg)
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