UK public expectations for inflation over the coming years have increased to a new high level, according to a Bank of England (BoE) survey.
The BoE survey was based on questioning about 2,000 people between 3 November and 7 November and was conducted by market research company TNS.
The Bank of England/TNS inflation attitudes survey for November found current inflation was found to be at 2.9%, up from 2.8% in August.
For 12-months ahead, expectations are now for inflation of 2.9%, up from 2.8%; with two-year ahead inflation seen rising to 2.9% up from 2.7% previously.
Five-years ahead, inflation is seen reaching 3.5%, up from the 3.4% predicted in August.
When questioned about the future path of interest rates, 63% of respondents expected rates to rise over the next 12 months, up from 42% in August, while 17% said rates might stay about the same, from 32% in August.
Jim Leaviss, head of Retail Fixed Interest, M&G Investments said: “Reflecting on 2017 synchronised global economic growth at a fair pace, low unemployment, and a gradual path of monetary tightening have created a backdrop that should be generating higher inflation. However so far, this hasn’t happened as inflation remained subdued in many economies despite the additional help of unprecedented stimulus activity from central bankers.
“In the UK we’ve been more pre-occupied recently with the cost-push inflation spike following sterling’s Brexit-related depreciation. Within the technology angles, the claim of “robots taking all our jobs” certainly remains a topical one, with its long-term structural potential to dampen middle class consumption (and therefore inflation) as robots increasingly replace workers up the skills curve. At the same time, of course, near-term inflation drivers must be watched.
“I believe US inflation could well surprise to the upside over the next 12 months. With forward looking indicators suggesting a further acceleration in economic activity, coupled with a continued strengthening of the labour market, 2018 could be the year where some firmer inflationary pressure comes through.”