LONDON (Reuters) -British public inflation expectations for the next 12 months rose to 4.2% in October, their highest since April, a monthly survey by YouGov for U.S. bank Citi showed on Friday. Long-
UK Inflation Expectations Hit Highest Level Since April, Says Survey
Overview of Inflation Expectations
LONDON (Reuters) -The British public's expectations for inflation over the next 12 months rose to 4.2% in October, the highest since April, a monthly survey by YouGov for U.S. bank Citi showed on Friday.
Impact on Bank of England's Policy
Citi said the reading was likely to reinforce the wariness some members of the Bank of England's Monetary Policy Committee feel about cutting interest rates further, even after September inflation came in below the BoE's 4% forecast.
Market Reactions to Inflation Data
Financial markets moved rapidly to price in a nearly 80% chance of a further quarter-point rate cut this year after weak labour market data last week was followed by lower-than-expected headline inflation.
Survey Methodology and Findings
Previously, the next BoE rate cut had not been expected until March or April next year after August's rate cut was only approved by a narrow 5-4 margin due to some policymakers' fears that inflation was becoming too persistent.
"We think inflation expectations remain an important aspect of the monetary policy framework, particularly for those who are cautious about further cuts," Citi economists Callum McLaren-Stewart and Michel Nies wrote.
"For those who favour a hold, a further drift in expectations may be at least as significant as an undershoot in realised CPI," they added.
Year-ahead inflation expectations had stayed in a narrow range of 3.9% to 4.0% for the previous five months on Citi's measure.
Long-term inflation expectations also rose to 4.2% in October from 4.1% in September, Citi said.
The results were based on a YouGov survey of 2,005 adults conducted on October 21 and October 22.
(Reporting by David Milliken; editing by William James)
