Rising inflation expectation

Inflation expectation are closely correlated with actual inflation.

However recently in teh UK the rise in inflation exxpectation was larger than could be explained by the CPI change.

The BOE explains that givven the wide variation in rice changes, households' perception of inflation may be influenced more by the prices of certain highvisibility items such as food, gas and electricity prices.

When these prices were rising, households' perceptions of inflation might increase more than the aggregate inflation rate, which might in turn feed through into higher inflation exxpectation.