By Nicholas Winning
LONDON (MarketWatch) -- The U.K. public's expectations for inflation over the next year were stable for the third consecutive month in September, defying both the rise in the country's inflation rate and the slowdown in the economy, Citi Inc. said Wednesday.
The bank said a monthly poll by YouGov showed the median for inflation expectations in the year ahead was steady at 3.5%--down from 3.9% in June--the highest level for more than two years--but above the Bank of England's medium-term inflation target of 2.0%.
The median for expectations over the longer term, described as the next five to 10 years, rose to 3.8% in September from 3.7% in August, Citi said.
Citi economist Michael Saunders said the results of the survey are likely to reassure the BOE's Monetary Policy Committee which appears increasingly likely to reopen its quantitative easing asset purchase program to stimulate the economy. The QE program was paused in February 2010 after the purchase of GBP200 billion of government bonds, or gilts.
"Inflation expectations have not been destabilised by the sharp overshoot in CPI inflation this year, or by the sharp swing in the MPC's discussions from whether to hike rates--early this year--to whether to resume QE," he said in a note.
The latest official data show the U.K. annual inflation rate rose to 4.5% in August from 4.4% in July.
