U.K. Consumer Inflation Expectations Jump to Highest Since 2014by
Households see consumer price growth of 2.8% over next year
More people now forecast a BOE rate hike within a year
U.K. households expect a faster inflation pickup in the next year than previously thought and have become more convinced that the Bank of England will have to raise interest rates.
Consumers expect price growth to average 2.8 percent in the next 12 months, the most since August 2014, the BOE said today as it published the results of its November Inflation Attitudes Survey. That’s up from 2.2 percent in August. The increase of 0.6 percentage point is the biggest in more than six years.
Forty-one percent of respondents said the BOE’s key interest rate, currently at a record-low 0.25 percent after a cut over the summer, will rise by next November. That’s up from 21 percent in August. Most expect the rate to rise “a little,” according to the survey.
The pound’s drop since the U.K. voted in June to leave the European Union is putting upward pressure on import prices, and the BOE forecasts that inflation will accelerate to above its 2 percent goal next year.
That’s prompted a shift among U.K. policy makers. After they lowered interest rates in August and said another cut was possible, they have now adopted a neutral stance, saying rates could go up or down.