UK inflation expectations soar due to gas price hikes

BRITONS’ expectations for inflation over the coming 12 months surged to a 19-month high of 2.8 per cent in May from 2.2 per cent in April, a survey by Citi/YouGov showed yesterday.

Inflation expectations are now at their highest level since October 2008.

Citi said expectations may have been boosted by surprisingly strong inflation data for April, which was released last week, as well as rising petrol prices and media speculation of a rise in value-added tax.

“The crucial point for the Monetary Policy Committee probably is that longer-term inflation expectations have not, so far, been destabilised,” said Citi’s Michael Saunders.

But Saunders warned that further tests for inflation expectations lie ahead, “given the prospect of an extended period of above-target CPI.”