Inflation expectations are a key concern for the Bank of England, and policymakers cannot be totally sure that they remain well-anchored, the central bank's chief economist Spencer Dale said Monday.
In a foreword to the Bank's quarterly bulletin, Dale said that long-term inflation expectations appeared stable but that the latest research was less clear on whether shorter-term measures were still consistent with the Bank's 2 percent inflation target.
"Because inflation expectations cannot be observed directly and there are significant uncertainties surrounding the different indicators used, this risk can be assessed only imperfectly and it remains a key area of concern," Dale wrote.
Inflation is now at a two-and-a-half year high of 4.5 percent, and Dale's comments and the research conclusions are broadly in line with the views expressed in the minutes to May's Monetary Policy Committee meeting.
Dale himself has regularly voted for an end to the Bank's record low interest rates since February, though it will not be clear until later this month whether he also voted this way at last week's MPC meeting.
The Bank research showed that some of the rise in household inflation expectations in a Barclays survey could not be explained by other economic variables such as GDP or current inflation -- suggesting another factor, like a loss of confidence in the Bank, could potentially be to blame.
Financial market measures of short-term inflation expectations have also reacted more to volatility in monthly inflation data, suggesting investors are less sure that the Bank will be able to quickly tame price volatility.
In a separate research article, looking at the Bank's quarterly survey of public inflation attitudes, a chart showed public satisfaction with the Bank had fallen from around 50 percent in 2007 before the financial crisis to 20 percent now.
There seemed to be a strong correlation between above-target inflation and dissatisfaction with the central bank's policy.
