UK public's long-run inflation expectations rise to 9-month high: Citi/YouGov

LONDON (Reuters) -The British public's expectations for inflation increased in January, potentially because of worries about disruption to shipping in the Red Sea, a survey published by U.S. bank Citi showed on Friday.

Public expectations for inflation in the next five to 10 years rose to 3.6% in January from 3.4% in December, their highest since April 2023, according to the survey, which is conducted by online polling company YouGov.

Expectations for inflation for the 12 months ahead rose to a two-month high of 3.9% in January from 3.5% in December.

"This month, we think reporting around shipping disruption, as well as risks to energy supplies, have probably driven these data higher," Citi economist Benjamin Nabarro said.

Consumer price inflation data published in January showed a rise to 4.0% for December from 3.9% in November.

The Bank of England (BoE) kept interest rates at a nearly 16-year high on Thursday but opened up the possibility of cutting them as inflation falls, although it too warned of the risks from trade disruption.

The central bank said there were material inflation risks from "developments in the Middle East and from disruption to shipping through the Red Sea".

While surveys of public inflation expectations are not a good direct prediction of future inflation, the BoE views elevated expectations as a factor which will slow inflation's fall once the initial cause of the higher inflation fades.

A purchasing managers' survey released this week showed that British manufacturers had been hit by inflation stemming from tensions in the Red Sea, where attacks by Iranian-backed Houthi militants have disrupted global shipping.

Citi said it expected the public's inflation expectations to fall in the months ahead as headline consumer prices drop, unless the disruption from conflict in the Red Sea increased.

"For now these data remain consistent with well-anchored inflation expectations and further reductions in price growth in the year ahead," Nabarro said.

The YouGov poll of 2,028 British adults took place on Jan. 22 and Jan. 23.

(Reporting by David Milliken, writing by Sarah Young; Editing by Kate Holton and Emelia Sithole-Matarise)