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UK consumers' inflation expectations rise back above 2%

[LONDON] UK consumers' outlook for inflation rose last month after dropping to the lowest in more than a decade at the start of the year, according to the Bank of England.

In the BOE's May Inflation Attitudes survey, consumers said they expect inflation to average 2.2 per cent over the coming year, up from 1.9 per cent in the February survey.

Official data show Britain's inflation rate dropped below zero for the first time in more than half a century in April, though BOE policy makers say the weakness is due to temporary effects and will unwind later in the year. The Monetary Policy Committee, which has an inflation target of 2 per cent, kept its key interest rate at a record-low 0.5 per cent on Thursday.

Asked about the outlook for interest rates, 42 per cent said they expect benchmark borrowing costs to stay about the same level over the next twelve months, up from 39 per cent in February. Thirty-eight per cent of respondents expect rates to rise in that period.

The survey of 2,002 people was carried out by GfK NOP between May 8 and May 13.