UK expectations for inflation at a four year low

A Bank of England survey revealed today that consumers’ expectation of inflation have fallen to their lowest levels since May 2009 as consumers expect inflation is expected to fall to just over 2 percent over the next 12 months.

In November the same survey revealed an inflation expectation of 2.8 percent although the results themselves will heighten the Bank of England’s fear of deflation as inflation has fallen by over 3 percent since September 2008.

According to the Consumer Price Index (CPI) and the Bank’s own forecast inflation is set to reach zero percent through to 2012, which is well under the 2 percent ceiling.

The RPI inflation measure which is inclusive of housing costs had fallen to 0.1 percent and is predicted to fall below zero in the following months.

With the effect of quantitative easing yet to be felt and with interest rates at a record low of 0.5 percent the signs are that the pound will also continue to fall against the euro and dollar experienced down following the governments purchase of £2 billion worth of gilts.

The BoE/GfK NOP Inflation Attitudes survey revealed that the public perception of inflation was that it was falling at a record rate and that the number of consumers who are unhappy with the approach that the BoE has taken has increased.