LONDON – The British public’s predictions for inflation cooled again in January, according to a survey on Tuesday that should further comfort the Bank of England that high prices will not become permanently embedded in expectations.
U.S. bank Citi and polling firm YouGov said inflation expectations for five to 10 years ahead fell to 3.5% from 3.6% in December – within touching distance of the 3.0% to 3.4% range seen ahead of the COVID-19 pandemic.
For inflation in a year’s time, expectations in January fell to 5.4% from 5.7% in December.
The BoE is expected to raise interest rates on Thursday to 4% from 3.5%, according to a Reuters poll of economists.
Citi economist Benjamin Nabarro said business surveys, financial market inflation expectations and strong wage growth would keep upside risks to price pressures very much in the minds of BoE policymakers.
“But for now, the direct risks to expectations appear contained. And, with inflation having now peaked, we think there are tentative signs some of the acute risks that pervaded earlier in 2022 are now beginning to ease,” Nabarro said.