UK public inflation expectations slump due to COVID, BoE says

FILE PHOTO: A quiet bus passes the Bank of England, as the spread of the coronavirus disease (COVID-19) continues, in London, Britain, March 23, 2020. REUTERS/Toby Melville/File Photo

LONDON (Reuters) – The British public’s long-term expectations for inflation slumped to a record low in May as the coronavirus hit the economy, a quarterly Bank of England survey showed on Friday.

The BoE said the public’s average estimate for inflation in five years’ time fell to 2.6% in May from 3.4% in February, the lowest since the survey began in 2009.

Expectations for inflation in two years’ time tumbled to 1.9% from 2.9%, matching a record low set in February 2009, while inflation expectations for the year ahead edged down to 2.9% from 3.0%.

The BoE looks at public inflation expectations as a guide to the likely future inflation pressure from wage demands and businesses’ price-setting decisions.

The BoE is expected to announce a fresh increase of at least 100 billion pounds in its bond-buying firepower next week.

The data comes from an online survey of nearly 2,500 people conducted May 12-17, rather than the usual face-to-face interviews, which the BoE said could have affected survey results.

Reporting by David Milliken; Editing by William Schomberg

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