-Howard Archer, chief UK economist at IHS Global Insight
Britons' expectations for inflation over the coming 12 months dropped to the lowest level in over 13 years in February, the Bank of England said. Inflation expectations for the year ahead declined to 1.9% last month, the lowest level since late 2001, down from 2.5% in November. Moreover, expectations of inflation in two years' time also fell, down to 2.1% from 2.5%. The projections for five years were also pushed down to 2.8% from 3%. The survey results came as consumer price growth in Britain declined to a record low 0.3% in January. Furthermore, the share of Britons anticipating interest rates to rise in the coming 12 months fell to 36%, following 37% in November, while the proportion predicting a cut in rates doubled to 8%, the highest level since August 2012.
Last week the Bank of England opted to keep the interest rate unchanged in March, marking six years since policy makers reduced borrowing costs to all-time low levels to help the UK economy recover from a deep recession. The Monetary Policy Committee maintained the central bank's benchmark rate at 0.5% and agreed to leave the size of the bond portfolio unchanged at 375 billion pounds. Prospects of a very low near-term inflation led the MPC members to unite on rate vote in January after five months of a disagreement at the panel.
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