Inflation expectations ease, BoE figures show
The public's expectations for short-term inflation have eased but perceptions still outstrip the official rate of price rises, Bank of England figures showed.
Respondents to the BoE's inflation attitudes survey for November said the current rate of inflation was 2.9% compared with 3.1% in August. The median expectation for price rises over the next year was 3.1%, down from 3.3%, and for the following 12 months it was 2.9%, down from 3%.
The most recent figure for consumer price inflation showed prices rising at an annual rate of 1.5% in October, a three-year low, down from 1.7% the month before and below the BoE's 2% target. Wages are rising faster than prices after years of incomes being eroded by stagnant pay and inflation fuelled by the pound's post-Brexit decline.
The BoE released its figures as sterling jumped on news of the Conservatives' resounding election victory. If the pound maintains its gains inflation could remain subdued as the cost of imports falls.
Howard Archer, chief economic adviser to the EY Item Club, said: “The modest dip in inflation expectations on a one-year horizon and also on a two-year horizon was likely influenced by consumer price inflation moderating in recent months to its lowest level since November 2016. It may also have been influenced by a 'no deal' Brexit being avoided on 31 January. There were concerns that prices could be pushed up by a disruptive “no deal” Brexit that causes sterling to fall markedly and push up import prices."
By a margin of 52% to 7%, respondents to the BoE survey said the economy would be weaker rather than stronger if prices started to rise faster, compared with 57% to 7% in August. Expectations for inflation in five years' time rose to 3.6% from 3.1% in August.
With the appointment of a new BoE governor to replace Mark Carney delayed until after the election, respondents were slightly more positive about how the central bank does its job. The proportion satisfied minus the proportion dissatisfied was +30%, up from +27% in August.