UK public inflation expectations rise unexpectedly

The British public's expectations for inflation over the coming year and five to 10 years ahead rose unexpectedly in February, US bank Citi said after publishing a monthly survey conducted by market research company YouGov.

The Bank of England closely watches surveys of inflation expectations as it believes they influence businesses' pricing decisions and the extent to which workers push for higher pay.

British consumer price inflation hit a 41-year high of 11.1 per cent in October and is still in double digits, but last month the BoE forecast it would drop below 4 per cent by the end of this year.

However, Citi said public expectations for inflation in 12 months' time rose to 5.6 per cent in February from 5.4 per cent in January, while expectations for the long term rose to 3.8 per cent from 3.5 per cent.

Long term expectations had fallen during the previous five months.

"Today's unexpected increase re-affirms continued upside risks that have stalked UK inflation expectations in recent months," Citi economist Ben Nabarro said, adding that food shortages had probably boosted perceptions of inflation.

Snow and hailstorms in Spain and Morocco have disrupted the supply of salad vegetables to British supermarkets, leading to empty shelves and rationing by retailers.

Market research company Kantar reported on Tuesday that grocery prices in Britain in the four weeks to February 19 were a record 17.1 per cent higher than a year earlier.

YouGov surveyed 2,021 adults on February 22 and February 23.