The public's inflation expectations are close to the Bank of England's target of 2%, according to a survey by the Bank and market researchers GfK NOP.

The research revealed that the public expect prices to rise by 2.4% over the next 12 months from May this year. The expected inflation rate reached a peak of 4.4% in August last year, when the full extent of the economic problems was beginning to become clear.

"The fact that the public's inflation expectations have risen modestly dilutes fears that deflation could become a long-term serious problem for the UK economy," said Howard Archer, economist at HIS Global Insight.