Britons' inflation expectations hit record

Britons' expectations of future inflation rose to a series high of 3.3 percent in February, more than a percentage point above the actual rate of inflation, a survey by the Bank of England showed on Thursday.

The central bank's quarterly survey showed median expectations for the rate of inflation had picked up from 3.0 percent in November and 2.7 percent a year earlier.

The survey may be worrying for Bank policymakers who are concerned high inflation expectations can become self-fulfilling as workers demand higher wages to keep up with living costs.

At 3.3 percent, inflation expectations are at their highest since the survey began in November 1999.

The survey also showed people's perception of the current rate of inflation leapt to a record 3.9 percent from 3.2 percent in November and 2.9 percent a year earlier.

Consumer price inflation has been running above the central bank's 2 percent target since October. The latest official figures showed inflation at 2.2 percent in January.

Bank Governor Mervyn King has indicated inflation could well rise to 3 percent in the short term due to record oil prices and rising food costs.

The Bank cut interest rates in February for the second time in three months to shore up the economy in the face of a global credit squeeze but has indicated inflation remains a concern.

King has described the coming year as the toughest for more than a decade for monetary policymakers who have to balance the risk of a sharp economic slowdown with rising price pressures.

The Bank kept rates on hold at 5.25 percent earlier this month and markets are pricing in three further quarter-point cuts by the end of the year.

The survey was conducted between February 7 to 19.