Britons expecting to see a drop in rate of inflation

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Britons foresee a lower rate of inflation over the coming year than three months ago with inflation expectations easing to the lowest level in one and a half years, a quarterly Bank of England survey showed yesterday.

The results will reassure the Bank, which embarked on further quantitative easing asset purchases last month to support the economy despite inflation still being well above its 2 per cent target.

The Bank’s February inflation attitudes survey showed average public inflation expectations for the next 12 months fell to 3.5 per cent from 4.1 per cent in the November survey, hitting the lowest level since August 2010.

Official inflation dropped to 3.6 per cent in January, its lowest since November 2010, and the central bank predicts inflation to fall below its target in the second half of this year.

In the next two years, Britons saw inflation of 2.9 per cent, and in five years they predicted inflation at 3.2 per cent, both also down at the lowest level in one and a half years, the BoE’s survey showed.

The Bank’s survey also stated that the public’s satisfaction with the central bank bounced back from the record low hit in the November survey.

Members of the Bank’s Monetary Policy Committee voted on Thursday to freeze interest rates at a record low of 0.5 per cent and to hold off from printing more money under its quantitative easing (QE) programme.

Last month’s meeting saw a split emerging on the committee, despite the majority vote to raise the QE total by £50bn to £325bn.

Two MPC members wanted a £75bn rise, while others considered doing nothing.

The survey showed that fewer people expected interest rates to rise over the next 12 months. The net balance of those seeing a rise less those expecting a fall dropped to the lowest level since February 2009.

The central bank job has been complicated by uncertainty over the likely strength of demand at a time of public cuts, high unemployment and worries about the global economy.

A surge in oil prices may push up inflation in the short-term, but weaken growth in the medium-term.

The survey was carried out for the Bank by polling company GfK NOP, which surveyed 3,789 people between February 9 and 21.