Britons' expectations for inflation over the next 12 months and over the longer term declined in April, according to the latest monthly YouGov survey carried out for U.S. bank Citi and published on Monday. The survey found one-year inflation expectations fell to 5.0% from 5.4% in March, while expectations for the long run eased to 4.2% from 4.5% a month earlier.
The change comes amid wider market attention on how recent geopolitical tensions could affect energy prices and, by extension, inflation dynamics. The Citi/YouGov report noted the Bank of England watches public expectations closely because they can signal whether price pressures are becoming entrenched in the public mindset - a development that could shape interest rate decisions - even though the public are generally poor predictors of inflation.
On the volatility seen in recent months, Citi/YouGov said there remains a strong argument for treating the swings with caution. "We think there is still a compelling case to look through the volatility in these series for now until the volatility eases and the trend becomes clearer," the report said, urging a measured interpretation of the data rather than immediate policy reaction.
The previous month saw an unusually large increase in the one-year expectation. Citi/YouGov observed that March's spike - the biggest monthly rise in that measure in more than 20 years - may have been driven by a surge in fuel prices linked to the conflict in Iran and described the jump as "anomalous." The report suggests April's retreat may reflect a pullback in oil prices and, specifically, in future oil prices.
Looking ahead, the report said the downward path for expectations would likely resume if energy markets return to a more orderly state over coming months. "So long as the volatility is explicable, and the expectations appear to be both moderating and anchored, we think there is little basis yet to use this data as a convincing argument for a more hawkish policy position," Citi/YouGov concluded.
For policymakers at the Bank of England, the survey provides some relief amid the uncertainties posed by the Iran war's impact on fuel costs. While the numbers do not remove all ambiguity about inflation's trajectory, they reduce immediate pressure to interpret the earlier spike as evidence of permanently higher inflation expectations among the public.
Detailed findings
- One-year inflation expectation: 5.0% in April, down from 5.4% in March.
- Long-term inflation expectation: 4.2% in April, down from 4.5% in March.
- Survey: Monthly YouGov survey for U.S. bank Citi, published on Monday.