UK inflation expectations steady - BoE

Britons' expectations of future inflation steadied in August but remained way above the Bank of England's 2 per cent inflation…

Britons' expectations of future inflation steadied in August but remained way above the Bank of England's 2 per cent inflation target.

The central bank's August inflation attitudes survey showed median expectations for the rate of inflation over the coming year were 2.5 per cent, the same as in the May survey.

Asked to give the current rate of inflation, respondents cited a median 2.8 per cent, up from 2.7 per cent in the May survey and in line with February's 2.8 per cent reading, the joint highest since the survey began six years ago.

It was also much higher than the actual rate of inflation, which was 2.5 per cent in August.

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Economists said although policymakers may derive some comfort from the fact that rising utility bills have not driven up inflation expectations, they would likely raise interest rates again from 4.75 per cent to try to stamp out price pressures.

Analysts widely expect the bank to raise rates again in November after August's surprise quarter-point move.

The public seems to share that view, with 65 per cent of the 2,092 people polled saying they expected interest rates to go up again in the next 12 months - the highest percentage since August 2004 and up from 48 per cent in May.

Only 2 per cent of respondents thought rates could go down, also the lowest since August 2004.