Inflation is increasingly squeezing the economy, the latest inflation expectations make the BoE uncomfortable!


 Britons' expectations of inflation over the next one to two years are expected to rise to the highest level in nearly a decade and satisfaction with the Bank of England is falling, according to the BoE's quarterly survey.

The central bank is closely watching a survey of inflation expectations that finds signs that the public and businesses expect above-target inflation to take root, influencing wage bargaining and pricing strategies. Officials are confident the data can offer meaningful guidance to future behavior.

A survey on Friday showed public expectations of inflation over the next one to two years rose to 3.4% in November from 3.2% in August, matching May's reading which was the highest since November 2013.

British consumer price inflation hit a 41-year high of 11.1% in October, more than five times the BoE's 2% target.

On the other hand public satisfaction with the job done by the BoE in controlling inflation fell to -12, the lowest level since the survey began in 1999, down from -7 in August. However, not all survey measures are so negative.

Five-year inflation expectations rose to 3.3% in November from 3.1%, but were below May's two-and-a-half-year high of 3.5% and not far above the long-term average of 3.2%. Expected inflation over the coming year is expected to decline to 4.8% from August's record high of 4.9%.

In September, the British government announced measures to limit future rises in household energy bills.

Several other measures of inflation expectations have shown more declines in expectations than the BoE survey. The survey by Citi and YouGov, conducted on November 22 and November 23, showed inflation expectations for the five to 10-year period had fallen to 3.9% in November from a peak of 4.8% in August.

Next week the BoE is expected to raise rates by another half point to 3.5%, according to a Reuters poll of economists.