UK Inflation Expectations Ease Further in July, Survey Shows

The Bank of England's (BoE) concerns about inflationary pressures may be easing, as the British public's expectations for future price increases have fallen in July, according to a survey released by Citi and YouGov.

Expectations for inflation in five or more years' time dropped to 3.7% from 3.9% in June, while year-ahead expectations decreased to 3.4% from 3.8%. These figures are closely watched by the BoE's policymakers as they look for signs of embedded price pressures among consumers and businesses.

The surge in energy costs triggered by the Iran war had prompted the central bank to pause its interest rate increases earlier this year. However, Callum McLaren-Stewart, an economist at Citi, believes that a delayed increase in pump prices is unlikely to have a meaningful impact on expectations, given that pump prices react quickly to crude prices.

The BoE is expected to hold interest rates on Thursday, but the survey's results may provide some comfort for policymakers as they consider their next move. A separate survey of British firms last week showed they were planning smaller price and wage rises, which could also contribute to easing inflationary pressures.