Inflation Expectations Rise in the UK

LONDON (Reuters) – British households’ expectations for inflation rose in December, according to a survey published on Thursday, potentially raising concerns among investors regarding the slow pace of future interest rate cuts by the Bank of England (BoE).

The monthly Citi/YouGov survey indicated that expectations for inflation in a year’s time increased to 3.7% in December. The report did not provide a figure for November, but in October, the expectation stood at 3.3%.

For inflation expectations over the next five to ten years, the figure rose to 3.9%, up from 3.6% in November.

The BoE is assessing how much inflation pressure is still present in the British economy as it deliberates on when to lower borrowing costs for the third time since 2020.

Investors have significantly sold British government bonds recently, driven by concerns that inflation might remain too high for the BoE to enact substantial rate cuts this year, impacting economic growth and the government’s strained finances.

Earlier on Thursday, a separate survey published by the BoE revealed that British businesses are anticipating price increases and possible staff reductions in response to a rise in employers’ social security contributions, effective in April.