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UK inflation expectations hold steady despite recent price climb - Bank of England

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UK inflation expectations hold steady despite recent price climb - Bank of England

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LONDON (Reuters) – The British public’s expectations for inflation remained stable in the three months to early August, a Bank of England survey showed on Friday, despite this year’s rise in price growth after the Brexit vote. The BoE said median expectations for inflation in a year’s time held steady at 2.8 percent while expectations for inflation two years out edged down to 2.7 percent from 2.8 percent in the previous survey which was conducted in May. Inflation in five years’ time was seen at 3.4 percent, compared with 3.3 percent three months earlier, returning to a peak last seen in May of last year. Britain’s inflation rate broke through the BoE’s 2 percent target earlier this year as the fall in the value of the pound since the Brexit vote in 2016 pushed up the price of imports. British consumer price inflation held steady at 2.6 percent in July after reaching 2.9 percent, its highest level in nearly four years, in May. The central bank last month predicted inflation would peak at nearly 3 percent in October although since then sterling has weakened further against the euro, meaning the pressure on prices from the weak currency may persist for longer than the BoE thought. But most economists polled by Reuters last week said they expected the BoE to keep its benchmark interest rate at a record low of 0.25 percent until 2019 as the country goes through the process of leaving the European Union. In the BoE survey published on Friday, 32 percent of respondents said rates might stay about the same over the next 12 months, compared with 31 percent in May. Forty-two percent of respondents expected rates to rise over the next 12 months, unchanged from May. The BoE is due to make its next statement on interest rates on Thursday of next week. The BoE’s data was based on a survey of 2,096 people conducted by polling company TNS between Aug. 4 and 8.

(Reporting by William Schomberg; editing by Michael Holden)
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