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UPDATE 1-UK inflation expectations hold steady in Aug - BoE

Published 09/17/2009, 04:54 AM
Updated 09/17/2009, 04:57 AM
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LONDON, Sept 17 (Reuters) - Britons' inflation expectations for the coming year held steady at 2.4 percent in August, unchanged from May, a quarterly survey from the Bank of England showed on Thursday.

The figures should provide reassurance to the central bank which is attempting to kick-start the economy with record low interest rates and unprecedented asset purchases.

"Inflation expectations remain reasonably close to the Bank's target and are certainly not running away on the upside," said Philip Shaw, economist at Investec.

The survey also showed people thought the current rate of inflation was 3.8 percent, down from a reading of 4.0 percent in May but well above the actual rate of inflation.

Despite the worst downturn in decades, inflation has been slower to fall in Britain than in many other major economies. It slowed to 1.6 percent in August from 1.8 percent in July, below the central bank's 2 percent target but above analysts' forecasts.

Economists expect inflation to trough at around 1 percent later this year before picking up in 2010.

Britain's economy is widely expected to emerge from recession in the third quarter. However, BoE Governor Mervyn King cautioned earlier this week that the recovery could be fragile and said the risks to the inflation target remained on the downside.

The survey showed that the public has grown less satisfied with the way the BoE is doing its job. The net satisfaction index fell to 15 percent in August from 17 percent in May, moving back towards the series low of 10 percent hit in February.

The survey was carried out on behalf of the central bank by GfK NOP between August 13-18.

(Reporting by Farah Master and Christina Fincher; Editing by Ruth Pitchford)

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