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By David Milliken
LONDON, Aug 3 (Reuters) - The British public's expectations
for inflation over the coming year jumped in July in response to
recent rising prices, although longer-term expectations
remained stable, a monthly survey showed on Tuesday.
The Citi/YouGov survey showed public inflation expectations
for the next 12 months rose to 3.1% in July from 2.8% in June,
taking this measure further above its long-run average though
below December's peak of 3.8%.
British consumer price inflation hit a three-year high of
2.5% in June and the Bank of England looks set to raise its
near-term inflation forecasts on Thursday, though it is likely
to stress that the increase will be temporary.
Longer-term inflation expectations for the next five to 10
years held steady at 3.4%.
Citi said the rise in short-run price expectations probably
reflected fears of higher household energy bills later this year
as well as the recent faster-than-expected rise in CPI due to
higher oil prices and post-COVID supply-chain bottlenecks.
The BoE could draw some comfort from the fact that this had
not yet fed into longer-run inflation expectations, but would
need to be watchful that higher headline inflation later in 2021
did not push long-term price expectations higher.
"A marked increase here could yet force the Bank to tighten
policy even if the recovery is incomplete," Citi said.
The BoE looks at public inflation expectations as a guide to
how businesses will set prices and the extent to which workers
will push for bigger pay rises.
The survey also showed that an above-average percentage of
people surveyed said they did not know how inflation would
change in future, creating a greater chance of a shift in
long-term expectations, Citi added.
(Reporting by David Milliken; Editing by Kate Holton and
William Schomberg)
