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Source: Reuters
LONDON, Sept 13 (Reuters) - Britons’ expectations of future inflation held at a series high in August even though the actual rate has fallen below 2 percent, a survey by the Bank of England showed on Thursday.
The central bank’s quarterly survey showed median expectations for the rate of inflation over the coming year were 2.7 percent, the same as in the May survey and matching the highest level since the survey began in 1999.
“High inflation expectations, despite higher interest rates and lower inflation, will remain a lingering concern for the Monetary Policy Committee,” said Paul Dales at Capital Economics.
The figures had little impact on financial markets, which were more focused on a survey overnight showing house prices fell for the first time in two years which reinforced expectations that interest rates have peaked at 5.75 percent.
The Bank had signalled last month it might need to raise rates to 6 percent to control inflation in the medium term, but policymakers are now expected to keep rates on hold while they assess the impact of financial market turbulence.
The BoE survey also showed people’s perception of the current rate of inflation eased slightly in August to 2.8 percent from 3.1 percent in the May survey, but was still well above the latest official reading of 1.9 percent in July.
And more than two-thirds of respondents said they expected interest rates to rise again in the next 12 months, only 4 percent thought they would fall.
“Relatively elevated inflation expectations highlight the fact that there are still significant medium-term inflation risks, and reinforce our belief that the Bank of England will be very wary about any early trimming of interest rates,” said Howard Archer, economist at Global Insight.
The BoE survey was conducted between Aug. 16 and Aug. 21.
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