UK Firms Tame Inflation Expectations, But Rates Hold Steady

UK businesses are expecting slightly smaller price and wage increases over the coming year as lower energy costs ease some near-term pressure, according to a recent survey by the Bank of England.

The survey's Decision Maker Panel shows that companies in the three months to July expect price growth of 3.9% over the next 12 months, down from 4.1% previously. This marks a pullback from a more than two-year high, but remains above the 3.4% expected in February before the Iran war started.

Expectations for wage growth over the coming year also edged lower, falling by 0.1 percentage points to 3.4%. The softer outlook follows a ceasefire in the Iran war that briefly pushed down energy prices.

The figures are likely to be welcomed by the central bank as it closely watches how businesses set prices and how fast wages are rising. Even with the modest easing, the survey suggests cost pressures are not yet back to the levels seen before the conflict.