{"id":2892,"date":"2009-11-03T11:05:51","date_gmt":"2009-11-03T11:05:51","guid":{"rendered":"https:\/\/mmm.9dotdigital.ca\/?p=2892"},"modified":"2025-03-27T15:48:56","modified_gmt":"2025-03-27T15:48:56","slug":"rising-inflation-expectations-another-reason-for-qe-caution","status":"publish","type":"post","link":"https:\/\/mmm.9dotdigital.ca\/?p=2892","title":{"rendered":"Rising inflation expectations another reason for QE caution"},"content":{"rendered":"

The percentage balance of consumers expecting higher inflation over the next year has risen from -5% in July to +4% in October, according to the EU Commission survey. The current balance, while still depressed by historical standards, is the highest since November last year – see chart.<\/p>\n

It is tempting to discount the recent increase as a reflection of the coming VAT hike. The latest Citigroup \/ YouGov survey, however, shows that longer-term inflation expectations have also firmed, with the average forecast rising from 2.8% in January to 3.2% in October.<\/p>\n

There is a danger that expectations are moving higher partly because of doubts about the Bank of England’s ability or willingness to achieve the 2% inflation target over the medium term. The Bank’s inflation forecasts have been consistently too low in recent years while its gilt-buying may have raised concerns about policy independence.<\/p>\n

The survey measures are influenced by current inflationary trends and have historically correlated more closely with retail than consumer prices. Headline RPI inflation is likely to rise from -1.4% in September to 3% or more by next spring as a result of the VAT hike and unfavourable energy, house price and mortgage rate effects – see previous post<\/a>.<\/p>\n

Inflation expectations are an important influence on the Bank’s policy decisions – the EU Commission measure is a component of the “MPC-ometer” model for forecasting interest rate changes described in earlier posts. The recent increase is a further argument against an expansion of gilt purchases at this week’s meeting.<\/p>\n

\"\"<\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

The percentage balance of consumers expecting higher inflation over the next year has risen from -5% in July to +4% in October, according to the EU Commission survey. The current balance, while still depressed by historical standards, is the highest since November last year – see chart. It is tempting to discount the recent increase […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-2892","post","type-post","status-publish","format-standard","hentry","category-money-moves-markets"],"_links":{"self":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2892","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2892"}],"version-history":[{"count":1,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2892\/revisions"}],"predecessor-version":[{"id":5201,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2892\/revisions\/5201"}],"wp:attachment":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2892"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2892"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2892"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}