- Howard Archer, chief UK and European economist at IHS Global Insight
The UK public have eased its short and medium-term inflation expectations as price pressures remain weak due to both external and internal factors. Britons now see consumer prices rising 2.5% over the next twelve months, down from 2.8% in August. Expectations for 2016 also declined to 2.5% from 2.8% measured previously, the Bank of England/GfK NOP Inflation Attitudes Survey for November revealed. Inflation expectations stay well anchored, due to the fact that both external and internal price pressures remain sluggish. The UK consumer price inflation in October climbed to 1.3%, after sliding to the lowest level in five years of 1.2% in September. In its November forecasts, the central bank cut the short-term outlook for CPI, saying "inflation is expected to remain below the target in the near term, and is more likely than not to fall temporarily below 1.0% at some point over the next six months".
Moreover, Britons scaled back their expectations that the Old Lady of Threadneedle Street will lift interest rates over the next twelve months. The proportion of British consumers anticipating rates to increase in the next year fell to 37% in November, the lowest since November 2013, from the highest level in three years of 49% in August. Meanwhile, economists expect the BoE to hike interest rates from their all-time low 0.5% between July and September next year, and in recent days financial markets have priced a move even later.
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