UK Inflation Expectations Plummet After Bank of England Switches Survey Providers

The Bank of England reported a sharp drop in public inflation expectations after it changed survey providers. In August, Savanta's survey showed year-ahead inflation expectations of 3.2%, down from Ipsos' May result of 4.0%. Two-year expectations fell to 2.9% from 3.5%, and five-year expectations dropped to 3.2% from 3.9%. However, the BoE cautioned that comparisons between the two surveys should be treated with caution due to the change in provider.

The BoE commissioned Savanta to poll expectations in May, which came in around half a percentage point below Ipsos' results across all three horizons. Both firms found an identical reading of 5.0% for current inflation. Pantheon Macroeconomics argued that the switch had flattered the numbers and criticized the BoE for not publishing a consistent data series.

Adjusting for the break, Pantheon said expectations had eased only slightly, in line with lower motor fuel and food price inflation. The central bank awarded Savanta the contract after a competitive retendering process.