Brits’ inflation expectations scale to record high 

Britons’ expectations of where inflation will land in a decade has climbed to the highest level ever, reveals a closely watched survey published today.

Households think the rate of price rises will still be more than double the Bank of England’s two per cent target in 10 years’ time, running at 4.4 per cent, according to polling by You Gov and Citi.

The fresh figures suggest Britain is headed for a self-fulfilling inflationary environment that the Bank has warned could result in prices being permanently higher in the long term.

A wage/price spiral can occur if consumers’ inflation expectations become de-anchored – meaning they think the cost of living will be markedly higher than its historic average – by prompting workers to demand higher pay, strengthening incentives for businesses to hike prices to offset cost pressures.

Critics of Threadneedle Street say they should have started hiking interest rates earlier to partly quash price pressures in the UK economy.

This month, the monetary policy committee lifted rates for the third meeting in a row for the first time since 1997, taking them to pre-pandemic levels of 0.75 per cent.

Figures published by the Office for National Statistics last week revealed the cost of living is running at its hottest rate since 1992 at 6.2 per cent.

Britain’s fiscal watchdog released fresh economic forecasts to accompany chancellor Rishi Sunak’s spring statement last week in which it is said living standards in the UK will erode at the worst rate since 1956 as a result of weak growth being outstripped by a 7.4 per cent annual inflation rate.