UK businesses anticipate a 4.0% increase in prices over the next 12 months, down from April's 4.4% high. This slowdown is attributed to subsiding energy price shocks. Expected wage growth held steady at 3.4%, while firms plan a 0.4% reduction in employment.
These business expectations are a key input for the Bank of England's monetary policy decisions, influencing interest rate setting to manage inflation.
A survey by the Bank of England's Decision Maker Panel indicates that British businesses are anticipating a slower rate of price increases over the next year. Companies surveyed expect prices to grow by 4.0% in the coming 12 months, down from April's two-year high of 4.4%. This moderation is attributed to the subsiding energy price shock, partly influenced by geopolitical events. On a three-month moving-average basis, price expectations rose to 4.0%, the highest since February 2025. Expected year-ahead wage growth held steady at 3.4% on a three-month moving-average basis, its joint-lowest since July 2022. Additionally, businesses planned to reduce employment levels by 0.4% over the next 12 months, the biggest planned reduction in six months. The survey suggests that second-round effects through firms' inflation expectations appear muted for now, with weaker job growth.
Pick the topics you care about. Get only what matters, on your cadence.