UK public's inflation expectations hit record high

UK public's inflation expectations hit record high - Citi/YouGov

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LONDON (Reuters) -The British public's expectations for inflation in 12 months' time jumped to a record high in January, according to a monthly survey that will bolster the Bank of England's concerns that the current spike in price growth will prove persistent.

Year-ahead inflation expectations in the monthly Citi/YouGov survey, published on Wednesday, surged to 4.8% in January from 4.0% in December, the highest since this series began in 2006 and almost double their long-run average.

The official rate of consumer price inflation hit 5.4% in December, its highest since March 1992, and the BoE is widely expected to raise rates on Feb. 3, which would be its second rate rise in less than two months.

Longer-term public inflation expectations for the next five to 10 years - which some economists think give a better guide on whether price pressures are becoming entrenched - held at 3.8%, their joint-highest level since 2013.

"Today's data, especially the level of long-term expectations, suggest elevated risk inflation expectations could become de-anchored to the upside as inflation accelerates in the months ahead," Citi economist Benjamin Nabarro said.

"However, for now, we think expectations remain anchored overall."

BoE official Catherine Mann said last week that the central bank needed to lean against inflation pressures, to stop expectations of higher inflation among businesses and workers from becoming self-fulfilling.

The sharp rise in the cost of living is also becoming a major political challenge for Prime Minister Boris Johnson's government, with a sharp rise in regulated energy prices and higher taxes on workers due to take effect in April.

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