U.K. Inflation Expectations Show Signs of De-Anchoring, Adding to Pressure on BOE
2022.06.10 12:07
By Geoffrey Smith
Investing.com — U.K. consumers’ expectations for inflation are rising further and further away from the Bank of England’s 2% target, adding to the pressure on the central bank for more interest rate hikes.
Expectations for inflation over the next 12 months rose to 4.6% in May, according to a BoE survey conducted jointly with market research firm IPSOS that was published on Friday. In the last survey in February, the median expectation had only been 4.3%.
Moreover, consumers expect inflation to stay higher above target for longer. The median expectation for the following year rose to 3.4% in the previous survey, while the median expectation for the next five years rose to 3.5% from 3.3%.
The Bank of England had warned at its latest meeting that it expects to keep raising interest rates despite the economy heading for a contraction later this year, under pressure from big rises in regulated energy prices and this year’s tax increases. Independent analysts have also warned that the negative after-effects of Brexit on the U.K.’s trading performance with Europe are also becoming harder to ignore.
