Inflation expectations in the UK have stabilised in an encouraging sign that calm may be descending on households in the post-Brexit UK economy.
According to the latest estimates calculated by YouGov for Citi, household inflation expectations for next year have slipped a touch to 1.78 per cent this month, following a spike to 1.83 per cent in the wake of the referendum in July.
The survey figure is far lower than the 2.6 per cent inflation forecast by economists at Citi and should act as an encouraging sign for policymakers that Britain is not braced for a period of overheating consumer prices.
In another positive sign, long-term inflation expectations (over 5-10 years) have crept up from 2.4 per cent to 2.6 per cent in the August survey – indicating that consumers expect a healthy and humming economy in the future.
“The Bank of England’s rate cut and QE revival in August may have contributed to this stabilisation in inflation expectations”, said analysts at Citi.
Inflation stood at a 22-month high of 0.6 per cent last month. The BoE is forecasting an overshoot of its 2 per cent target in 2018 to 2.4 per cent as a weaker pound and rising oil prices push up prices.
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