Andy Bruce

LONDON, (Reuters) – A record number of British citizens believe that inflation will rise over the next twelve months. This data could increase expectations that the Bank of England might raise interest rates in the coming month.

According to exclusive Reuters figures, 48% of respondents polled by GfK, a consumer research company, expected that prices would rise more quickly over the next twelve months than 34% in September.

It was the highest percentage since records started in January 1985 (when Margaret Thatcher was prime Minister) and over a decade prior to the BoE becoming operationally autonomous.

Inflation expectations have risen following a month of skyrocketing gas prices. This has led to the collapse of many British energy suppliers. Households now face the possibility of large bills in 2022.

Inflationary pressures in Britain have been exacerbated by Brexit and global supply chain issues as the world economy opens from COVID-19 lockdowns.

According to the BoE, inflation is expected to rise above 4% soon after easing back.

According to economists, the BoE is expected to be the central bank that raises borrowing costs the most. This could happen at its next policy announcement in Nov. [ECILT/GB]

Joe Staton (GfK client strategy director) stated that “more and more consumers expect that prices for goods and service will rise dramatically over the next twelve months.”

This rapid rise will affect our ability to save and shop, as well as our willingness to spend in a period when inflation is outpacing our incomes.

The BoE rate-setters will be closely monitoring inflation expectations to determine whether they should raise their interest rates.

Andrew Bailey, BoE Governor, said Sunday that the BoE must act in case of an increase in inflation expectations within the medium term. Medium-term inflation expectations were defined by the BoE as being five to ten years in the future.

Although the GfK’s indicator of inflation expectations is only for the next 12 month, it’s likely that the BoE Monetary Policy Committee members will notice the size of the change. Data are part of the GfK monthly Consumer Confidence Index. It dates back as far as early 1970s. October saw an eight-month drop in the overall confidence index.

“Consumers already worry about the financial health of their individual finances. Staton added that the spectre rising cost can only make matters worse.

GfK’s Price Expectations figures, which were previously freely accessible as part of monthly EU country consumer surveys, weren’t made public until the beginning of this year.

From Oct. 1-13, the survey included 2,000 Britons.