LONDON, July 28 (Reuters) – The British public’s expectations for future inflation continued to fall in July, according to a survey from U.S. bank Citi and pollsters YouGov that could help to reduce worries at the Bank of England about price pressures in the economy.
Expectations for inflation in five or more years’ time, which are closely watched by the BoE, fell to 3.7% in July from 3.9% in June, the survey released on Tuesday showed.
Year-ahead expectations, which tend to be influenced by moves in short-term inflation and energy prices, decreased to 3.4% from 3.8%.
The BoE’s policymakers routinely monitor inflation expectations for signs that price pressures could become embedded among consumers as well as businesses.
The surge in energy costs triggered by the Iran war prompted the central bank to pause its run of interest rate increases earlier this year.
“Like with gas prices, there remains a risk that a delayed increase in pump prices could trigger a small increase in expectations,” Callum McLaren-Stewart, an economist at Citi, said.
“But given pump prices react quickly to crude prices and the scale of the increase in July was well below what we saw in Q2, we think it is unlikely to have a meaningful impact.”
A survey of British firms published last week showed they were planning smaller price and wage rises.
The BoE is expected to hold interest rates on Thursday.
(Reporting by Muvija M; editing by David Milliken and William Schomberg)
