UK Household Inflation Expectations Fall Ahead Of Rate Decision

(Bloomberg) -- Households sharply revised down their expectations for UK inflation last month, in a sign that wage settlement pressures may begin to ease.

Individuals surveyed by the Bank of England said they thought CPI inflation would be at 3.9% in 12 months, down from 4.8% when asked in November.

The data indicate that households are becoming more confident in the BOE’s ability to get the cost-of-living crisis under control.

This will come as a relief to policymakers on the rate-setting Monetary Policy Committee, who are worried that high inflation expectations are causing workers to demand increased wages, adding to the problem.

Official data to be released on Wednesday, however, could show inflation falling from its January rate of 10.1% into single digits for the first time since last August. Households surveyed in February put the current inflation rate at 9.2%.

Goldman Sachs, meanwhile, has predicted that inflation could fall below the BOE’s 2% target by the end of this year after the £2,500 ($3,030) cap on energy bills was extended by Chancellor Jeremy Hunt in his budget this week.

The BOE is set to unveil its latest interest-rate decision on Thursday, with economists predicting a 25 basis-point hike to 4.25%. The central bank has delivered an unprecedented series of increases since December 2021 in an effort to prevent a wage-price spiral.

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