British households are feeling a little less panicked about prices. One-year-ahead inflation expectations dropped to 4.7% in May 2026, according to the Citi/YouGov survey, down from 5.0% in April and a March peak of 5.4%. The BoE responded accordingly, holding its Bank Rate steady at 3.75% during its June meeting, pointing to easing inflation expectations and declining energy prices as reasons it didn’t feel compelled to hike.
What drove the shift
The March spike in expectations traced directly back to energy price increases linked to the Iran conflict, which sent oil markets into a brief tailspin. But energy prices have since reversed course, oil fell, utility costs stabilized, and households recalibrated their outlook.
Actual consumer price index inflation reinforced the calmer mood. CPI held steady at 2.8% year-over-year in May, a 13-month low that came in below what analysts had forecast. Longer-term expectations also cooled. The 5-to-10-year household inflation outlook fell to 4.0% in May, suggesting that the March panic didn’t permanently rewire how people think about prices over the medium term.
The BoE acknowledged in its June commentary that household inflation expectations remain above pre-COVID averages, but emphasized they had eased meaningfully from the post-March shock peaks.
