Inflation: Firms expect to hike prices at slowest rate since November 2021
Firms are expecting price and wage growth to ease over the coming months, giving rate-setters a boost in their fight against inflation.
According to the Bank of England’s decision maker panel – a survey from CFOs at over 2,000 UK SMEs – businesses expect their own output price inflation to slow. Over the next year, finance bosses expect to raise prices by 4.4 per cent, down from an expected 5.5 per cent the month before.
This is the lowest level of expected price increases since November 2021, and down from a peak of 6.7 per cent in July last year.
Wages are expected to grow five per cent over the next year, unchanged from the month before, making it the joint lowest level since May last year.
This is also significantly lower than actual wage growth in August, which was 6.9 per cent.
Steadily falling wage settlements and falling output prices will help bring inflation under control, bosses reckon. The survey showed that CFOs thought inflation would fall to 4.8 per cent in a year’s time, down from 5.4 per cent in July.
The data will give the Bank of England’s rate-setters a lift as they consider their next options. Members of the rate-setting committee are nervous that inflation will remain persistently high thanks to strong wage growth.
Yesterday, Andrew Bailey, governor of the Bank, admitted he had been “surprised” by the pace of wage growth, suggesting it will be a key area to focus on going forward.
He also indicated that rates were nearing their peak, telling MPs “we’re much nearer the top of the cycle… on the basis of current evidence”.