UK Inflation Expectations Soar to Highest Level Since June 2025

Long-term inflation expectations in Britain have risen to their highest level in over a year, according to a survey from Citi and YouGov. The poll of over 2,000 British households found that expectations for inflation over the next 12 months rose to 4.5% in September, up from 3.9% in August. This is the highest since June 2025, excluding March.

Citi noted a divergence between its poll and other inflation expectations surveys, such as the Bank of England's Decision Maker Panel of businesses. The spread between Citi/YouGov and DMP was 86 basis points in August, well above the historical average of 16 bps.

The BoE is watching closely for signs that the jump in energy prices caused by the Iran war could turn into longer-lasting inflation pressures. While it's unclear if the BoE will place more weight on business views or household views, Citi thinks the latter remains more likely as a hedge against future inflation.