UK firms expect selling price pressure to cool but not wages, BoE survey shows

British companies expect to raise selling prices by the smallest amount in nearly three years but wage growth shows no sign of cooling, a survey showed on Thursday in mixed news for Bank of England officials gauging inflation pressures.

The BoE's Decision Maker Panel, which is closely watched by members of the Monetary Policy Committee, showed businesses during the three months to August expected selling prices to increase by 3.6 per cent over the next year, the lowest reading since September 2021 and down from 3.7 per cent previously.

But forecasts for wage growth - a crucial metric for the BoE as it monitors price pressure - remained at 4.1 per cent during the three months to August, unchanged from the July survey.

The single-month readings showed forecasts have remained at 4.0 per cent to 4.1 per cent since May, meaning the sharp drop in wage growth expectations over the previous 18 months appears to have stalled.

Stubbornly high wage growth tops the list of concerns among the hawks on the MPC, who worry that it will bake inflation pressure into the economy on a longer term basis.

The survey also showed that uncertainty felt by companies fell in the aftermath of Prime Minister Keir Starmer's landslide election win, sinking to its lowest level since just before the COVID-19 pandemic swept Britain.

Investors see a roughly one-in-four chance that the BoE will cut interest rates at its September 12 policy announcement, although a cut is fully-priced for November.

Last month, BoE Governor Andrew Bailey said he thought longer-term inflation pressures were easing but further interest rate cuts would not be rushed because it was still too soon to be sure inflation was beaten.