
Jun 10, 2022 04:54AM ET
By: AnalysisWatch
UK consumers' inflation expectations are moving further away from the Bank of England's 2% target, increasing pressure on the central bank to raise interest rates further.
Inflation expectations for the next 12 months rose to 4.6% in May, according to a survey released Friday by the BoE and conducted jointly with market research firm IPSOS. In the previous survey in February, the average expectation had been 4.3%.
Consumers also expect inflation to remain above target for longer. The median expectation for the next year rose to 3.4% in the latest survey, while the median expectation for the next five years rose to 3.5% from 3.3%.
The Bank of England had warned at its last meeting that it expected to continue raising interest rates even though the economy was heading for a downturn later this year under pressure from sharply higher regulated energy prices and this year's tax hikes. Independent analysts have also warned that the negative aftermath of Brexit on the UK's trade performance with Europe is becoming increasingly difficult to ignore.
Bank of England Chief Economist Huw Pill said after the Bank's last rate hike in May, "Personally, I think more needs to be done in this transition from a very supportive monetary policy for the economy, really going back to the financial crisis, through the impact of Brexit and the pandemic." He cautioned, however, that this doesn't necessarily mean moving to a "super restrictive stance, but a stance that takes away some of that support and reflects more the fact that inflation is higher and labor markets are tighter."
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