LONDON (Reuters) -The British public’s expectations for inflation over the next one to two years rose to their joint-highest level in nearly a decade and satisfaction with the Bank of England slid, according to a quarterly BoE survey.
Central bankers watch surveys of inflation expectations closely for signs that people and businesses expect above-target inflation to become entrenched, influencing wage-bargaining and pricing strategies – though not all officials are convinced the data offer a meaningful guide to future behaviour.
Friday’s survey showed that the public’s expectation for inflation in the next one to two years rose to 3.4% in November from 3.2% in August, matching a May reading which was the highest since November 2013.
British consumer price inflation hit a 41-year high of 11.1% in October, more than five times the BoE’s 2% target.
Net public satisfaction with the job the BoE is doing in controlling inflation fell to -12, its lowest since the survey began in 1999, down from -7 in August.
Not all the survey measures were so negative, however.
Expectations for inflation in five years’ time rose to 3.3% in November from 3.1%, but were below May’s two-and-a-half year peak of 3.5% and not much above their long-run average of 3.2%.
Expectations for inflation over the year ahead declined to 4.8% from August’s record-high 4.9%.
In September, Britain’s government announced measures to limit future rises in household energy bills.
Some other measures of inflation expectations have shown more of a decline in expectations than the BoE survey. A survey by Citi and YouGov, conducted on Nov. 22 and Nov. 23, showed inflation expectations for five to 10-years’ time had fallen to 3.9% in November from a peak of 4.8% in August.
The BoE survey took place from Nov. 4 to Nov. 7, just after the BoE raised rates by three quarters of a percentage point to 3%. Next week the BoE is likely to raise rates by a further half point to 3.5%, according to a Reuters poll of economists.
(Reporting by David Milliken; Editing by Kate Holton)