The UK public’s median expectation is that benchmark annual inflation will be 3.3% over the coming year, the highest such forecast for nearly two years.

The Bank of England’s Monetary Policy Committee has hammered home the importance of keeping the public’s expectations of future inflation low as it attempts to look through a “temporary” spike in prices and hold UK base rates at a record low of 0.5% to support the economy.

The bank’s latest quarterly inflation attitudes survey, published yesterday may jangle the nerves of some members of the nine-strong MPC.

In the Bank of England’s previous quarterly survey, people had forecast benchmark annual consumer prices index inflation would be about 2.5% over the coming 12 months.

Economists voiced their belief that the MPC would still not be in any hurry to raise base rates given the impending UK fiscal consolidation, which is viewed as a threat to the emerging economic recovery.

And high inflation expectations look extremely unlikely to feed through to significant pay rises given ongoing wage freezes in some parts of the private sector and future slashing of public spending.

Annual UK CPI inflation has surged from 1.1% last September to 3.7% in April, nearly double the 2% target.More positively from an inflation perspective, official data yesterday showed UK factory gate prices rose by a smaller-than-expected 0.3% in May.

Producers’ input prices, covering materials and fuel, fell by 0.6% month-on-month in May. Although this was slightly less steep than the 0.8% drop forecast by the City, it was the first monthly fall in input prices since last September.

Vicky Redwood, senior UK economist at consultancy Capital Economics, said of the inflation outlook: “The good news was May’s relatively benign producer prices figures … Provided that oil prices do not start to rise again, there is now a good chance that cost pressures early on in the pipeline have now peaked.”

She added: “Less reassuring was the pick-up in households’ inflation expectations revealed by the Bank of England’s … survey.”

Redwood noted the YouGov and Citigroup measure of inflation expectations had also risen sharply.

However, while seeing potential for higher inflation to persist in coming months, she believed the MPC would continue to focus on the medium-term picture when setting

interest rates.

Redwood said: “We have pointed out before that inflation tends to influence inflation expectations

rather than the other way around. All measures of expectations rose as inflation picked up in 2008. But this did not stop inflation from falling back sharply – with expectations falling back quickly too.”

Noting speculation that Chancellor George Osborne might hike the rate of value-added tax from 17.5% in his June 22 Budget, she added: “Admittedly, the current rise in inflation threatens to last longer than that in 2008, particularly if VAT is increased in the upcoming emergency Budget.

“Against that, though, the generally weaker economic environment and greater degree of slack in the labour market suggests that any rise in inflation expectations is even less likely to prompt a pick-up in actual inflation or wages. Accordingly, we doubt that the MPC will fret too much.”