British households’ inflation expectations fell in January, reversing a recent upward trend, according to a monthly survey released by Citi and YouGov on Thursday.

The survey found that inflation expectations for the next year declined to 3.5% in January, down from 3.7% in the previous month. Longer-term expectations, covering a five-to-ten-year horizon, also eased to 3.7% from 3.9%.

The Bank of England, which is set to announce an interest rate decision later on Thursday, closely monitors inflation expectations as part of its assessment of price pressures in the economy.

Citi noted that the decline in inflation expectations offered some relief following recent increases, suggesting that future inflation remains broadly anchored.

"However, the overall level of expectations remains a concern," said Citi economist Benjamin Nabarro. "After years of adverse supply shocks, there is a tendency to interpret bad news through an inflationary lens."

Nabarro added that while headline inflation is expected to rise sharply in the coming months, uncertainty surrounding underlying inflation trends is likely to persist for some time.