Inflation expectations rise in November - BoE

LONDON Fri Dec 7, 2012 9:34am GMT

A couple walk past a shop window in London November 13, 2012. REUTERS/Luke MacGregor

A couple walk past a shop window in London November 13, 2012.

Credit: Reuters/Luke MacGregor

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LONDON (Reuters) - Britons expect a higher rate of inflation over the coming year than they did three months ago, a quarterly Bank of England survey showed on Friday.

The BoE's November inflation attitudes survey showed that average public inflation expectations for the next 12 months rose to 3.5 percent from the 2-1/2 year low of 3.2 percent in the August poll.

A rise in public inflation expectations can act as a warning sign for central banks that higher wage demands and further prices rises in shops are in the offing, though to date there has been little sign of this in Britain.

At a two-year horizon, Britons expected inflation of 3.2 percent, and in five years time they saw inflation at 3.6 percent. In August, the expectation was for 2.8 percent and 3.1 percent respectively.

The news of the rise in inflation expectations follows the biggest jump in more than a year in the consumer price index of inflation targeted by the BoE, which rose to 2.7 percent in October. The people surveyed for the BoE believed that inflation was running at a rate of 4.4 percent, higher than in August.

Consumer price inflation has not been below the BoE's 2 percent target since December 2009.

This increase was a factor behind the decision by some members of the BoE's Monetary Policy Committee not to approve more quantitative easing to stimulate the economy in November, and on Thursday the MPC again voted to hold asset purchases at 375 billion pounds for another month.

Higher university tuition fees and food prices lay behind most of October's rise, however, and there is little sign of widespread inflation pressures in an economy which is still struggling to generate solid growth, four years after the height of the financial crisis.

The BoE forecasts inflation of about 2.6 percent for the fourth quarter of 2013, and of 2.3 percent for Q4 2014.

The survey was carried out for the BoE by polling company GfK NOP, which surveyed 2,012 people between November 1 and November 6.

It also showed that net public satisfaction with the BoE had risen from the record low hit in August's survey.

(Reporting by David Milliken and Peter Schwartzstein)

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