Citi/YouGov: UK public inflation expectations hit new record high
March 28, 2022, 10:21 am

Citi/YouGov: UK public inflation expectations hit new record high

City of London in England/Pixabay

The US News reported, citing Reuters, the British public's expectations for inflation over the next five to 10 years hit a joint record high in February, according to a survey that is likely to strengthen the Bank of England's intention to raise interest rates further in the coming months.

U.S. bank Citi and polling firm YouGov said their gauge of expectations for inflation in five to 10 years' time rose to 4.1% from 3.8% in January, equalling a record high struck in June 2011.

With inflation surging to its highest levels since the early 1990s, the BoE is worried that expectations for rapidly rising prices will become engrained and make it harder for it to return inflation to its 2% target once the immediate price shock has passed.

The BoE raised interest rates on Feb. 3 for the second time in two months and warned further modest tightening would be needed in the coming months to bring inflation back to its 2% target in the next two to three years.

Monday's survey showed public inflation expectations for the coming 12 months hit an outright record of 5.6% from 4.8% in January.

The British public's expectations for inflation over the next five to 10 years hit a joint record high in February, according to a survey that is likely to strengthen the Bank of England's intention to raise interest rates further in the coming months (File photo: Pixabay)

Citi economist Benjamin Nabarro, adding that this was still not his base case, siad: "Today's data, especially the level of long-term expectations, suggest a growing risk that expectations could become de-anchored."

"However, these risks do now merit particular vigilance as CPI inflation exceeds 8% in the months ahead. For the (BoE), these data - alongside recent developments - may increase the risk of an outsized move in Bank Rate in March."

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Financial markets expect the BoE to increase rates to 0.75% from 0.5% this month, and for rates to reach 1.5% by August, but before Russia's invasion of Ukraine investors saw a strong chance of a half-point rate rise in March.

The Citi/YouGov survey, which dates back to 2005, polled 2,076 people between Feb. 22 and Feb. 23.

Source: usnews

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Upon arriving to participate in the summit of the European Political Community, which includes around forty heads of state in Budapest, he said, "I look forward to sitting with the elected U.S. president and seeing how we will collectively ensure we meet challenges, including the threats from Russia and North Korea." He also noted that the strengthening of ties between Russia and North Korea poses a threat to the United States as well, according to reports from Agence France-Presse.

Before Trump's victory, Rutte expressed confidence that a united Washington would remain part of the defensive alliance, even if Trump became the 47th president of the United States. In an interview with German public broadcaster ZDF last Monday night, he stated that both Republicans and Democrats understand that NATO serves not only the security of Europe but also that of America. He added that both candidates are aware that the security of the United States is closely tied to NATO.

On Wednesday, NATO congratulated Trump on his victory but did not address the Ukrainian issue.

It is noteworthy that the relationship between the elected U.S. president and the defense alliance was not the best during his first term in the White House. Trump criticized NATO member states multiple times and even hinted at withdrawing from the alliance unless they increased their financial contributions.

Additionally, the issue of the Russian-Ukrainian war is one of the matters that complicate relations between the two sides, especially since Trump has repeatedly stated that he can end this ongoing conflict, which began in 2022, quickly. He implied that he had a peace plan between Kyiv and Moscow, while his vice president, JD Vance, revealed aspects of that plan, which stipulated Ukraine's commitment not to join NATO, thereby sending reassuring signals to the Russians.

Furthermore, many NATO member states in Europe fear that Trump might halt military aid to Ukraine after he previously criticized the U.S. for pouring funds into supporting Ukrainian President Volodymyr Zelensky.