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UK inflation expectation stable, uncertainty grows: MNM YouGov/Citi

[LONDON] Expectations among people in Britain for inflation over the coming year remained at their highest level since late 2015 in March, following a pick-up in official inflation data from below zero last year.

The monthly YouGov/Citi survey, published on Thursday, found year-ahead inflation expectations held at 1.5 per cent, the same level as in February and up from 1.2 per cent in January.

Expectations for inflation over the next five to 10 years edged down to 2.8 per cent from 2.9 per cent in February, which had been the highest level since October 2014.

Michael Saunders, chief UK economist at Citi, said the number of people who said they did not know what inflation was likely to do over the year ahead rose to 17 per cent, matching the all-time high for the survey which began in 2005.

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"The rise in inflation uncertainty probably implies that inflation expectations are less anchored on the (Bank of England's) 2 per cent target than they used to be," he said.

"If actual inflation falls further ... then inflation expectations are likely to fall. But if actual inflation rises steadily in coming months, as we expect, then inflation expectations may well track higher again. The Monetary Policy Committee are likely to be highly alert to any such signs," he said.

The Bank of England has signalled it is no hurry to raise interest rates, which have sat at a record low of 0.5 per cent since the depths of the financial crisis more than seven years ago.