Policymakers determining when to lower interest rates are pleased with the Bank of England survey responses, which revealed that the British public's expectations for the rate of inflation over the next year have decreased over the last three months.
Specifically, the survey showed that Median expectations for inflation for the next 12 months fell to their lowest since August 2021 at 3.0% in February, down from 3.3% in November. Moreover, consumer price inflation was 4.0% in January and December, greatly harming the purchasing power of consumers. However, upcoming data is expected to show it fell to 3.6% in February, according to preliminary figures from a Reuters poll of economists.
While the public's forecasts for potential inflation are not a reliable indicator of price growth, BoE economists believe they will be helpful to project future wage pressure and household capacity to accept higher prices. This has proven to be true, as a recent survey of over 4,000 respondents found that net satisfaction with the BoE's controlling of inflation increased to minus 5% from minus 14% in November. Subsequently, using recent survey data, the BoE predicts that inflation will return to its 2% objective for the first time in three years in the second quarter of this year.
Source: Milliken, David. Reuters. "UK inflation expectations fall, easing pressure on Bank of England". March 18 2024.
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