UK inflation expectations fall again as BoE nears rates decision

LONDON (Reuters) - The British public's expectations for inflation fell again in July, a survey showed on Monday, potentially adding to the case for the Bank of England (BoE) to increase interest rates by only a quarter percentage point later this week.

U.S. bank Citi and pollsters YouGov said expectations for inflation in five to 10 years' time dropped to 3.8% in July from 4.0% in June, the third fall in the last four months.

Inflation expectations for 12 months' time edged down to 6.0% from 6.1%, the survey showed.

The BoE's Monetary Policy Committee (MPC), which has raised interest rates steadily since December to fight an inflation rate now above 9%, has said it is ready to act forcefully if needed to stop the recent price surge from becoming embedded.

That has raised the prospect of the first half percentage-point BoE rate hike since 1995 as soon as Thursday, after its August policy meeting.

"For the MPC, these data (alongside recent developments) are likely to mean concerns surrounding medium-term inflation expectations remain," Benjamin Nabarro, an economist with Citi, said in a note to clients.

"However, we see little in today's data that should provide a further impetus for an out-sized hike this week."

(Writing by William Schomberg; Editing by Kylie MacLellan and Christopher Cushing)