Britons’ long-term expectations for inflation hit a more than two-year high this month, as consumers braced for a bout of higher prices after the pound’s post-Brexit vote fall, a survey showed on Wednesday.
The British public expected inflation in the next five to 10 years will reach 3 percent, the highest forecast since September 2014 and up from a November reading of 2.8 percent, Citi and pollster YouGov said.
In the shorter term, respondents to the survey predicted inflation in 12 months’ time would rise to 2.43 percent from an earlier forecast of 2.36 percent.
So far, the British economy has weathered the initial Brexit shock better than many expected. But a rise in inflation next year is likely to strain the spending power of households who have driven the recovery in the economy since the financial crisis of 2007-09.
The Citi/YouGov survey chimed with other gauges of inflation expectations from businesses and financial markets since June’s Brexit vote, which prompted a sharp fall in the value of sterling.
Citi said the British public’s expectations for inflation were returning to normal level after hitting an all-time low after the Brexit referendum.
“Due to uncertainty amidst the beginning Brexit process, we do not expect this to trigger BoE policy ‘normalisation’, however, at least until after the Article 50 process … is completed in 2019,” said Citi economists Christian Schulz and Ann O’Kelly.
On Tuesday Prime Minister Theresa May on Tuesday repeated that she intends to trigger Article 50 – the formal divorce procedure of leaving the European Union – by the end of March.
British consumer price inflation stood at 1.2 percent in November, the highest level since October 2014, official data showed last week.
YouGov surveyed 2,099 people between Dec. 19 and Dec. 20.
(Reporting by Kate Holton and Andy Bruce; editing by Sarah Young and Toby Chopra)