Britons’ inflation expectations climbed to their highest level in three years last month, underlining the impact soaring prices are having on households.
U.K. consumers questioned in August expected prices to increase 4.2 percent over the next year, the Bank of England said in a quarterly survey published in London today. That’s up from a reading of 3.9 percent in May.
Policy makers have shifted their focus to the faltering recovery after Monetary Policy Committee members Martin Weale and Spencer Dale in August dropped their call to increase interest rates. Faster inflation is adding to the pressures on growth by eroding Britons’ spending power.
Thirty-eight percent of respondents expected the bank to increase its benchmark interest rate over the following 12 months, down from 55 percent in May. Pollster GfK NOP questioned 2,054 people aged 16 and over between Aug. 18 and Aug. 23. Policy makers have kept the key rate at a record-low 0.5 percent since March 2009.
Asked about inflation in about five years’ time, the median answer was 3.5 percent compared with 3.3 percent in May. Expectations for inflation in the 12 months from August 2012 rose to 3.5 percent from 3.2 percent.
Asked to give the current rate of inflation, respondents gave a median answer of 4.8 percent, up from 4.5 percent in May.
Inflation accelerated to 4.5 percent in August, more than twice the bank’s goal. Consumer-price pressures are being fuelled as British utility companies boost electricity and gas prices due to rising commodity costs earlier in the year.
Policy maker Adam Posen has called for the central bank to resume bond purchases to kick-start growth, arguing inflation may fall to below the 2 percent target in a year.
The National Institute of Economic and Social Research said last week economic growth slowed to 0.2 percent in the three months through August. Claims for jobless benefits rose 20,300 last month, while the ILO unemployment rate held at 7.9 percent in the three months through July, the Office for National Statistics said yesterday in London.
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