The British public's outlook for inflation softened in June, according to a joint survey conducted by U.S. bank Citi and pollster YouGov. The results show a decline in both longer-term and near-term inflation expectations, moves that are likely to be watched closely by the Bank of England as it monitors whether price pressures remain embedded in public sentiment.
Expectations for inflation five or more years ahead - a gauge that the Bank of England pays particular attention to - eased to 3.9% in June, down from 4.0% in May. Meanwhile, the year-ahead measure, which is typically more responsive to recent inflation trends and shifts in energy prices, fell to 3.8% from 4.7% a month earlier.
Commenting on the results, Citi economist Callum McLaren-Stewart said the marked retracement in expectations, and the fact that levels are now approaching what he described as pre-conflict levels, indicates the risk of deanchoring is diminishing. Deanchoring refers to a situation in which consumers lose confidence that the central bank can bring inflation under control.
"With such a sharp retracement, and levels now near their pre-conflict level, we think the risk of deanchoring is fading," McLaren-Stewart said.
McLaren-Stewart also noted that he expects inflation expectations to decline further, citing the memorandum of understanding (MOU) between the United States and Iran as a factor that could contribute to that unwind. The economist's comments link the survey's numerical shifts to recent diplomatic developments referenced in the poll commentary.
The online survey sampled 2,021 adults and was carried out over June 22-23. The movement in expectations - both at the five-year horizon and for the coming year - signals a reduction in the degree to which households anticipate persistent price increases.
For policymakers at the Bank of England, these readings matter because sustained high expectations can influence wage demands and pricing behaviour, reinforcing inflation. The June survey results, by showing lower expectations, should offer some relief to those concerned about entrenched inflationary psychology.
Key data points from the poll:
- Five-year inflation expectations: 3.9% in June, down from 4.0% in May.
- Year-ahead inflation expectations: 3.8% in June, down from 4.7% in May.
- Survey sample: 2,021 adults; fieldwork dates: June 22-23.