UK Inflation expectations for this year drop sharply, poll shows

Date: Tuesday 24 Jan 2012

The public’s inflation expectations for the next 12 months fell sharply in January, to 2.6%, from 3.1% before, according to the results of the latest YouGov poll carried out on behalf of Citi.

That is their lowest level since April 2010 and marks the fourth biggest drop since the survey began in 2005.

The retreat in long-term (5 to 10 years out) inflation expectations was more moderate, with those moving down to 3.2% from December’s reading of 3.4%, well below last June’s reading of 4.1%.

What might the implications of the above be? According to Citi economist Michael Saunders, "the drop in inflation expectations, coupled with the weak economy, pave the way for a further major increase in QE at the February meeting. We continue to expect that QE will be expanded well beyond market expectations this year."

AB

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