Britain's Long-Term Inflation Expectations Near Record High

Long-term public inflation expectations in Britain came close to their highest level in more than a year in September, according to a survey from Citi and YouGov. The report found that expectations for inflation over the next 12 months rose to 4.5% in September from 3.9% in August.

Expectations for price growth in the longer term also rose to 4.3% from 4.1%, which is the highest since June 2025, excluding March. This leaves the series only 15 basis points from its peak in March and the highest it has been since June 2025.

The Bank of England (BoE) is watching closely for signs that the jump in energy prices caused by the Iran war could turn into longer-lasting inflation pressures. Citi noted a divergence between its poll of over 2,000 British households and other inflation expectations surveys like the BoE's Decision Maker Panel of businesses.

Citi said it was unclear if the BoE would place more weight on the views of businesses that set prices or on household views which can influence pay demands but are sensitive to short-term rises in energy and food prices. On balance, Citi thinks the latter remains more likely as a hedge against future inflation.