
UK Firms Anticipate Easing Selling Price Pressure, But Not Wages, According to BoE Survey – Reuters
British Companies Anticipate Modest Price Increases Amid Persistent Wage Growth
British companies are expecting to raise their selling prices by the smallest margin in nearly three years, while wage growth remains robust, according to a recent survey. This presents mixed signals for Bank of England officials who are monitoring inflationary pressures.
The Bank of England’s Decision Maker Panel revealed that businesses anticipated a 3.6% increase in selling prices over the next year, the lowest projection since September 2021 and a slight decrease from the previous figure of 3.7%.
In contrast, forecasts for wage growth, a critical metric for the Bank of England, remained steady at 4.1% for the three months leading up to August, unchanged from the July survey. Single-month readings indicated that expectations for wage growth have consistently hovered between 4.0% and 4.1% since May, suggesting that the significant drop in wage growth projections seen over the past 18 months may have plateaued.
Persistently high wage growth is a major concern for some policymakers, who fear it could embed inflationary pressures within the economy over the long term.
The survey also noted a decline in uncertainty among companies following Prime Minister Keir Starmer’s decisive electoral victory, bringing anxiety levels to their lowest point since just before the COVID-19 pandemic hit the UK.
Investors believe there is about a 25% chance that the Bank of England will reduce interest rates at its upcoming policy announcement on September 12, although a cut is fully anticipated for November.
Recently, Bank of England Governor Andrew Bailey indicated that while he perceives a reduction in long-term inflation pressures, any potential rate cuts will be approached cautiously, as it may still be premature to conclude that inflation is under control.