By David Milliken
LONDON (Reuters) -The British public’s expectations for inflation over the coming year dropped to their lowest in three years in August, a Bank of England survey showed on Friday, likely reassuring policymakers ahead of next week’s interest rate decision.
The central bank closely watches surveys of public inflation expectations as a guide to future inflation trends.
When it cut interest rates from a 16-year high of 5.25% on Aug. 1, the BoE’s Monetary Policy Committee said it expected recent falls in inflation expectations to lead to lower future wage demands and smaller price increases by businesses.
The BoE’s quarterly inflation attitudes survey showed that inflation expectations for the coming 12 months fell to 2.7% in August, the lowest since August 2021, from 2.8% in May.
Expectations for the following 12 months were unchanged at 2.6% while expectations for five years ahead rose to a nine-month high of 3.2% from 3.1%
The survey of more than 2,000 people aged 16 to 75 took place between Aug. 2 and Aug. 6, just after the most recent rate cut.
Economists polled by Reuters this week predicted the BoE would leave interest rates unchanged at 5% on Sept. 19 but cut rates to 4.75% on Nov. 7 after its next meeting.
Consumer price inflation returned to its 2% target in May and June but edged up to 2.2% in July and the BoE forecasts it will rise to around 2.75% by the end of this year before drifting lower.
The BoE’s gauge of public satisfaction with its control of inflation – which tends to track recent inflation – rose to +4 in August from -4 in May. This was its highest since February 2022, when Russia’s full-scale invasion of Ukraine caused energy prices to soar in most of Europe.
(Reporting by David Milliken; Editing by Catarina Demony, William James and Christina Fincher)
