UK inflation expectations fall in October, Citi/YouGov survey shows

UK Inflation Expectations Fall in October, But Rate Hike Still Expected

Overview of UK Inflation Trends and Monetary Policy Outlook

Public Inflation Expectations Drop in October

LONDON, Oct 29 (Reuters) - The British public's expectations for future inflation fell for the first time in two months in October, though this was unlikely to stop the Bank of England hiking rates next week, analysts at Citi said on Thursday.

Long-Term and Short-Term Inflation Forecasts

Expectations for inflation in five or more years' time, which are closely watched by the Bank of England, fell to 4% from 4.3% in September, according to a survey from US bank Citi and pollsters YouGov published on Thursday.

Year-ahead expectations, which tend to be influenced by moves in short-term inflation and energy prices, decreased to 4.2% from 4.5%.

Factors Influencing Inflation Expectations

Citi said there was little obvious explanation for the drop, given the rise in oil and gas prices continued in October and tensions remained high in the Iran war, keeping inflation risks high.

"For monetary policy, a one-month easing in household inflation expectations is unlikely on its own to have an impact on the Bank of England's reaction function," it added.

"We would expect the MPC (Monetary Policy Committee) to treat October's data as encouraging at the margin rather than as grounds for a substantive change in direction."

Bank of England Rate Hike Expectations

Investors expect a quarter-point rate hike from the BoE next Thursday, a move Citi said seems "all but guaranteed", with another move likely during the first quarter of next year.

(Reporting by Yoruk Bahceli, editing by William James)