Bank of England Sees Sharp Drop in Public Inflation Expectations After Survey Provider Switch

The Bank of England has reported a sharp drop in public inflation expectations after changing its survey provider. The central bank's August survey, conducted by Savanta, showed year-ahead inflation expectations of 3.2%, down from 4.0% in May, when Ipsos was the survey provider.

Two-year expectations fell to 2.9% from 3.5%, and five-year expectations dropped to 3.2% from 3.9%. However, most of this decline is attributed to the change in survey providers rather than a shift in sentiment.

The Bank of England noted that it had also commissioned Savanta to poll expectations in May, which came in around half a percentage point below Ipsos's results across all three horizons. Both firms found an identical reading of 5.0% for the public's perception of current inflation.

Pantheon Macroeconomics criticized the Bank of England for not publishing a consistent data series and faulted the switch to Savanta, which they believe flattered the numbers. They suggested adjusting for the break would show expectations eased only slightly, in line with lower motor fuel and food price inflation.