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 to 3.2% from 3.3%.
The BoE is watching measures of inflation expectations closely as it worries about long-term price growth pressures in the British economy.
It 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 risks to the economy from an inflation rate that stood at 7.9% in June, almost four times the BoE’s target.
(Reporting by William Schomberg, Editing by Sarah Young and Andy Bruce)
