UK Inflation Expectations Soar to Near-Highest Level

Long-term public inflation expectations in Britain have risen to their highest level in over a year. A survey by Citi and YouGov found that expectations for inflation over the next 12 months rose to 4.5% in September, up from 3.9% in August. This is adding pressure on the Bank of England as it considers whether to raise interest rates.

The longer-term inflation expectations rose to 4.3%, the highest since June 2025, excluding March. Citi noted that this leaves the series only 15 basis points from its peak in March.

The Bank of England is watching closely for signs that the jump in energy prices caused by the Iran war could turn into longer-lasting inflation pressures. A divergence between household and business views on inflation expectations has been observed, with households being more sensitive to short-term rises in energy and food prices.