LONDON (Reuters) -The British public’s expectations for future inflation fell in July, U.S. bank Citi said on Wednesday, offering some relief to the Bank of England which is expected to announce its 14th back-to-back interest rate increase on Thursday.
Public expectations for inflation in 12 months’ time fell sharply to 4.3% from 5.0% in June, according to the monthly survey conducted by Citi with market research company YouGov.
“The reduction in short-run expectations is a welcome development, with these data often playing an important role in wage setting,” Citi economist Benjamin Nabarro wrote in a note to clients.
“We expect these data to continue to ease in the months ahead as headline inflation falls back.”
Expectations for inflation in five to 10 years’ time also fell back to its pre-2020 average at 3.2% from 3.3% in June.
The BoE is closely watching measures of inflation expectations, including the Citi/YouGov survey, as it worries about long-term price pressures in the British economy.
Gauges of cost pressures faced by British companies have also moderated recently, even though wage growth remains at historically high levels.
The BoE is expected to raise its benchmark rate by a quarter of a percentage point, or possibly by half, on Thursday as it seeks to tackle the an inflation rate that stood at 7.9% in June, almost four times its target.
(Reporting by William Schomberg and Andy Bruce, Editing by Sarah Young and David Milliken)
