U.K. Consumer Inflation Expectations Fall to Lowest Since 2001

U.K. consumers’ expectations for inflation fell to the lowest in more than 13 years last month after a drop in oil costs dragged down consumer-price growth.

In its February Inflation Attitudes survey, the Bank of England said consumers expect the inflation rate to average 1.9 percent over the next 12 months. That compares with 2.5 percent in the November survey and marks the first time below the central bank’s 2 percent target since November 2001.

The drop in inflation expectations appears to have had little effect on Britons’ outlook for interest rates. In the survey published in London on Friday, 36 percent of respondents said they expect the key rate to rise from a record-low 0.5 percent in the next year, versus 37 percent in November. Over a five-year horizon, consumers expect inflation of about 2.8 percent, down from 3 percent in November. That’s the lowest response since 2009.

Asked what the current level of inflation is, the median response to the survey was 2.2 percent. Consumer prices actually rose just 0.3 percent in January, the latest month for which data is available.

BOE Governor Mark Carney has said the drop in the inflation rate is due to temporary factors that will unwind from the end of the year. Policy makers have also said that while they can respond to weak price growth if needed, the next likely move in policy is an interest-rate increase.

Asked about the BOE’s 2 percent inflation goal, 55 percent of survey respondents said it’s “about right,” up from 50 percent in November. Just 10 percent said it’s “too low,” with 21 percent saying it’s “too high.” GfK NOP conducted the poll in two separate periods between Feb. 5 and Feb. 17.

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