Long-term inflation expectations reach a two-year high of three per cent as Brits start to feel prices rise

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Post Brexit inflation – most memorably symbolised by Marmite – will cast a shadow over consumers (Source: Getty)

Inflation expectations have jumped to a two-year high as Brits predict it will reach three per cent in five to 10 years, according to a widely followed survey.

Long-term expectations this month are up from 2.8 per cent in November, according to the poll by YouGov for Citi.

This is the fifth month of increases in a row after the vote to leave the EU, although this is below the long-term average of 3.3. per cent since 2005.

Read more: Inflation hits its highest in two years as weak sterling takes its toll

Shorter-term inflation is also expected to increase, with prices expected to rise by 2.43 per cent, up from last month’s prediction of 2.36 per cent.

The short-term inflation expectations are still well short of the Bank of England’s (BoE) projections. The Bank says inflation will hit 2.7 per cent in the fourth quarter of 2017, up from 1.3 per cent in 2016.

The BoE’s target rate is two per cent, but it does not expect to be below that level over the course of the next three years, the extent of its forecasting period.

However, the Bank’s mandate to control prices by raising interest rates will conflict with a desire to continue stimulation of the economy – particularly if there is a marked slowdown as the UK begins the process of leaving the EU.

Read more: Revenge of the inflationistas: Trump has ushered in the end of the QE era

Inflation rises are seen as inevitable by economists in government and the private sector, as the fall in the value of sterling makes products and material inputs from abroad more expensive for businesses and consumers alike.

The devaluation of sterling is the most obvious economic effect so far of the vote to leave the EU in June.

Some economists expect a spike in inflation in the new year as six-month currency hedges that locked in pre-referendum exchange rates expire.

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