–Year-Ahead Expectations Rise To 3.3% y/y In Nov Vs 3.0% In Oct
–Long-Term Inflation Expectations Also Rise – To 3.5% Y/Y
–Citi Warns That the BOE MPC Should Be Worried By Latest Rise
LONDON (MNI) – The YouGov/Citi survey of UK inflation expectations
among the general public has revealed a further climb in short-term
and long-term inflation expectations.
The median for inflation expectations in the year ahead rose to
3.3% y/y in November from 3.0% y/y in October.
Year-ahead expectations are now the highest since September 2008 –
and, indeed, year-ahead inflation expectations have only been higher in
seven months since the survey began in late 2005, Citi/Yougov said.
YouGov also report that the median for longer-term inflation
expectations (next 5-10 years) rose to 3.5% in November from 3.4% in
October.
Longer-term inflation expectations also are the highest since 2008.
There was a matching 3.5% reading in September 2008, Yougov said.
“The MPC should be worried by the rise in inflation expectations.
The credibility of the inflation target clearly is being eroded. This is
perhaps not surprising given the repeated overshoots of inflation versus
the target and versus the MPC’s forecasts in recent years, as well as
the MPC’s habit of responding to repeated overshoots with excuses about
‘one offs’ rather than policy changes. But, with inflation expectations
rising, nominal GDP growth close to 6% y/y and pay deals picking up, we
believe that the MPC are unlikely to expand QE unless economic prospects
worsen sharply,” Citigroup analyst Michael Saunders said.
–London Newsroom: Tel:+44 207 862 7492;email: wwilkes@marketnews.com
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