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UK inflation expectations jump in September

by Mike Robinson

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© Reuters. FILEPHOTO: Shoppers take to Oxford Street during the December 13th 2020 coronavirus (COVID-19), outbreak in London. REUTERS/Simon Dawson

LONDON (Reuters) – The British public’s expectations for inflation over the next year and over the longer-term jumped this month, raising the risk that the Bank of England will tighten policy to stop them becoming unmoored, Citi said on Tuesday.

According to Citi’s monthly survey, pollsters YouGov found that the British public has increased its expectations for inflation by almost a whole percentage point over September, to 4.1%. However, they have raised their expectations for inflation in five to ten years, to 3.8%.

Today’s data and the shift in long-term expectation suggest that there is a growing risk inflation expectations will be deanchored to the upside. Citi warned that this sharp increase could result in a hawkish MPC response.

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