Inflation expectations in Britain are running at their highest level since 1992, according to a survey today, which flagged the risk that price pressures could generate higher wage demands.
The Barclays Survey of Inflation Expectations (BASIX) for August showed inflation was seen at 4.8 per cent in two years' time, the highest since comparable records began in 1992 and up from expectations of 4.7 per cent reported in the June survey.
Inflation expectations for the next 12 months rose to 4.7 per cent from 4.4 per cent in June, its highest since the first quarter of 1992.
"We forecast a further near-term rise in essential price inflation and qualitatively we see this as a risk that inflation expectations will remain at elevated levels through Q4," said George Johns, economist at Barclays Capital.
The survey of 1,900 people in the UK also showed no let-up for inflation was expected in the medium-term with five-year inflation seen at 4.8 percent. No comparison with June was given.
Bank of England monetary policy committee member Tim Besley said today the central bank faced a difficult task in fine-tuning monetary policy to try to help the UK economy while keeping inflation in check.
The BoE's August Inflation Report showed inflation hitting 5 per cent this year, but falling dramatically thereafter as food and oil prices fall and economic growth slows.
Reuters