UK's inflation expectations to fall again

Since the last survey taken in the first half of February, UK's rate of inflation has fallen further from 0.3% yoy in January to -0.1% yoy in April, which should be reflected in expectations. The fall to 0% in February was largely caused by lower oil prices but the final dip to -0.1% was the result of a timing distortion related to the way that air fares are sampled rather than a reflection of a genuine further weakening of the inflation trend. 

"Broadly speaking, consumer inflation expectations will have fallen since the February survey but this week's survey readings will probably represent the low point. Petrol prices have bottomed out and that will gradually pull up the rate of inflation as the year proceeds. In theory, the 5-year ahead expectations also polled in this survey should be interpreted as a judgement on the credibility of the inflation target. Over the last year or so, they have weakened slightly and expected to fall again in this survey", says Societe Generale in a report on Friday.