UK public inflation expectations fall further in July

Key facts

• British public inflation expectations for five or more years ahead fell to 3.7% in July from 3.9% in June.
• Year-ahead inflation expectations decreased to 3.4% from 3.8% in the same period.
• The survey is conducted by Citi and YouGov.
• The Bank of England monitors inflation expectations to prevent price pressures from becoming embedded.

Public inflation expectations in the United Kingdom continued to decline in July, according to a survey by Citi and YouGov. Expectations for inflation five or more years ahead fell to 3.7% from 3.9% in June, a closely watched metric by the Bank of England. Year-ahead expectations also decreased to 3.4% from 3.8%.

The central bank monitors these expectations to gauge potential for embedded price pressures. While a surge in energy costs previously prompted the BoE to pause interest rate hikes, economists suggest that recent oil price movements are unlikely to significantly impact future expectations.

This easing of public inflation expectations could provide some relief to the Bank of England as it considers its monetary policy. A separate survey of British firms indicated plans for smaller price and wage increases.