Inflation expectations track lower - Citi/YouGov

(Sharecast News) - UK inflation expectations fell in November, research showed on Wednesday, adding further weight to the prospect of another interest rate cut. According to a YouGov survey of the British public's expectations for inflation, carried out for US bank Citi, both short-term and long-term forecasts were lower.

Year-ahead expectations fell to 3.7% from 4.2% on a single-month basis, the lowest level since January. It was also the largest single-month move since July 2023.

Longer-term expectations fell to 3.9% from 4.2%.

The Bank of England has cut rates just three times so far this year, to 4%, despite sluggish economic growth, as it battles persistently sticky inflation.

However, while food prices remain elevated, the consumer prices index has eased off recent highs at 3.6%.

Citi said of the survey's findings: "The move is clearly dovish but we are cautious of over-interpreting a single month of data.

"If this downgrade is replicated, both over time and across the various inflation expectation surveys, we think it could challenge the idea prevalent in the Monetary Policy Committee that expectations are an ongoing barrier to both a lower terminal rate and a faster pace of cuts."

At its last meeting earlier this month, the MPC kept rates on hold, but signalled further cuts could be likely should inflation continue to track lower.

The BoE's long-term inflation target is 2%.