UK public's long-run inflation expectations rise to 9-month high: Citi/YouGov

UK inflation expectations hit a 9-month peak, possibly influenced by Red Sea shipping concerns, according to a Citi/YouGov survey.

British long-term inflation expectations for the next 5-10 years increased to 3.6% in January, the highest since April 2023, while short-term 12-month forecasts climbed to 3.9%.

Factors such as shipping disruptions and energy supply risks may have driven these concerns, noted Citi economist Benjamin Nabarro.

Inflation data for December showed a slight rise to 4.0%, with the Bank of England maintaining high interest rates yet suggesting potential cuts if inflation declines, albeit with caution over Middle East trade disruptions.

While public expectations are not an accurate predictor of inflation, the BoE regards them as influential on the inflation trajectory.

Manufacturers have already felt the impact of Middle East tensions, and while Citi anticipates a drop in public inflation views unless Red Sea conflicts worsen, Nabarro believes expectations remain stable. The YouGov poll surveyed 2,028 British adults on January 22 and 23.