UK inflation expectations ease further in Citi-YouGov June survey
British households' expectations for future inflation continue to soften in June, a sign that longer-term price concerns are becoming less entrenched. The shift is likely to offer some reassurance to the Bank of England as it monitors whether persistent inflation pressures are feeding into public sentiment.
Highlights
- Citi-YouGov's June survey shows UK five-year-plus inflation expectations fell to 3.9%, down from 4.0% in May.
- Year-ahead UK inflation expectations dropped sharply to 3.8% in June from 4.7% in May, reflecting lower near-term price pressures.
- Citi analysts say easing inflation expectations signal confidence in Bank of England control and reduce risk of entrenched inflation behaviour.
June survey points to softer price outlook
According to Reuters, Citi and YouGov reported that expectations for inflation in five or more years' time, a measure closely watched by the Bank of England, fell to 3.9% in June from 4.0% in May.Shorter-term expectations dropped more sharply. The public's year-ahead inflation expectation slid to 3.8% from 4.7%, a reading that tends to be influenced by moves in near-term inflation and energy price indicators.
The online survey covered 2,021 adults and was conducted on June 22 and June 23.
Bank of England watch and market implications
Callum McLaren-Stewart, an economist at Citi, said the decline suggests the risk of inflation expectations becoming deanchored is fading. He said the latest readings are now close to their pre-conflict level, indicating consumers are retaining confidence that the central bank can bring price pressures under control.McLaren-Stewart added that Citi expects inflation expectations to unwind further, particularly in light of the memorandum of understanding between the United States and Iran. For policymakers, easing public expectations can reduce concern that higher prices will become embedded in wage and spending behaviour.
Our earlier coverage of the technology-led market pullback examined how renewed inflation pressure was resurfacing as major tech companies pushed through price increases tied to higher AI-driven memory costs. We noted that the jump in core PCE inflation kept the Fed’s focus on price risks, adding to investor caution as the Nasdaq extended its losing streak.
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