UK inflation expectations rise as consumers' outlook weakens.


Inflation expectations in the UK picked up sharply in May, according to a closely watched Bank of England survey, with consumer perceptions about the current environment and future outlook pointing to rising price pressures at the till.

Bank of England

Source: Sharecast

The quarterly survey, which was carried out over the week to 5 May, showed that consumers believe the current rate of inflation to be 5%, up from 4.6% in February.

Asked about the rate of inflation over the coming year, median expectations were 4%, up from 3.2% in February, while expected inflation over the following year is expected to be 3.5%, up from 3.2% in the previous survey.

Even longer-term price projections rose, with inflation expected to be at 3.9% in five years' time, an increase from 3.7% three months ago.

At the same time, 78% of consumers believed the economy would end up weaker if the inflation rate accelerated, with just 4% believing the opposite, compared with 72% and 4% respectively in February.

Also of note, a higher proportion of consumers said they believed interest rates have risen over the past 12 months, and 53% said they expected rates to rise further over the coming year, up sharply from 30% in the previous survey.

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