UK Inflation Expectations Fall Across All Time Horizons

UK consumers' inflation expectations have fallen across all time horizons in August, according to the latest Bank of England survey. The median expectation for inflation over the coming year dropped to 3.2% from 4.0% in May, while expectations for the following 12 months declined to 2.9% from 3.5%. Longer-term expectations, covering roughly five years ahead, fell to 3.2% from 3.9%.

The survey also found that respondents estimated the current inflation rate at 4.9%, marginally lower than the 5.0% recorded in May. Expectations for interest rates softened slightly, with 51% of respondents predicting rates would rise over the next 12 months, compared with 53% in May.

The Bank of England highlighted that a change in survey provider made direct comparisons with May difficult, as Savanta took over from Ipsos. The BoE explained that 'Comparisons of changes inflation expectations between the headline May results (Ipsos) and the headline August results (Savanta) should therefore be treated with caution,'