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By Noah Barkin BERLIN (Reuters) - After one of her first encounters with Vladimir Putin in 2002, Angela Merkel joked to aides that she had passed the "KGB test" by staring straight into his eyes without averting her gaze. Unlike presidents in Washington - George W. Bush claimed to have gotten a glimpse of Putin's soul and Barack Obama promised to "reset" relations with Russia - the German chancellor has never harbored any illusions about the former Soviet agent, nor hopes that she might change him. It is this hard-nosed realism, born of Merkel's own experience growing up in a Soviet garrison town in East Germany and reinforced over a turbulent 14-year relationship with Putin, that has earned her respect in the Kremlin and thrust her into the potentially risky role of chief mediator in the Ukraine crisis.
Britons' expectations for an interest rate hike over the next year are on the rise even as their inflation forecasts have fallen, a quarterly poll commissioned by the Bank of England showed on Friday. The BoE's inflation attitudes survey showed that 40 percent of Britons expect a rate rise over the next 12 months, up from 34 percent in November and its highest since May 2012. However, inflation expectations over the next year fell to 2.8 percent from 3.6 percent and hit its lowest in four years. Inflation expectations over the next two and five years also fell to their lowest levels since August 2012.