British public expects lower inflation levels in the future

According to a monthly survey by Citi/YouGov, public expectations for inflation levels over the coming years have lowered. November’s results showed even lower figures, especially in comparison with record high expectations registered in August. Thus, a less pressure is expected to be put on the Bank of England regarding further tightening of its monetary policy. 

Inflation levels of consumer prices in October became the highest in 41 year while reaching the level of 11.1%. Experts attribute this primarily to an increase in energy prices, consequences of the pandemic, and a shortage of labor.

At the same time, the Citi/YouGov survey demonstrated a decline in inflation expectations over the midterm. According to the survey results, the expected level of inflation in 5-10 years was 4.2% in October, while the fresh data of November showed that the expectations for this period of time lowered to the level of 3.9%, which is significantly lower than the August figure of 4.8%.

As it was noted by Citi economist Ben Nabarro, higher risks for price stability over the midterm still remain. Nevertheless, the Citi specialists consider the immediate risks to be limited.

He also added that the decline in inflation expectations increases the chances of less aggressive rate hikes by the Bank of England. According to his words, it makes it more probable that the rates would be increased by half a percentage point in December to the level of 3.5% rather than by 75 basis points as it happened in November.