UK Firms Expect Slower Price and Wage Increases, Boosting Bank of England Inflation Outlook

LONDON: British businesses expect to raise prices and wages at a slower pace over the coming year, according to the latest Bank of England (BoE) Decision Maker Panel survey, offering fresh signs that inflationary pressures may be easing after recent volatility in global energy markets.

The survey showed that firms now expect their own prices to rise by 3.9% over the next 12 months, down from 4.1% in the previous three-month period. Expected wage growth also edged lower to 3.4%, compared with 3.5% previously, reflecting a modest easing in labour cost pressures.

The improvement follows a temporary decline in energy prices after a ceasefire in the Iran conflict helped reduce concerns over global fuel supplies. While pricing expectations remain above levels seen before the Middle East crisis, the moderation is likely to be welcomed by policymakers seeking evidence that inflation is moving closer to the central bank’s 2% target.

The Bank of England has been closely monitoring companies’ pricing and wage plans to assess whether higher energy costs could trigger broader inflationary pressures. Economists said the latest survey suggests the risk of a sustained wage-price spiral has eased, although uncertainty surrounding global energy markets continues to pose challenges.

The findings come ahead of the BoE’s next monetary policy meeting, where the central bank is widely expected to keep interest rates unchanged while continuing to assess the impact of domestic wage trends, consumer demand, and geopolitical developments on the UK’s inflation outlook.