Skip to content

UK Businesses Scale Back Price Rise Plans

British businesses have reduced their plans for price increases in February, but overall intentions for price and wage increases remain high, according to a Bank of England survey.

Bank of England
Bank of England

Bank of England's Monetary Policy Committee Split

The Bank of England's Monetary Policy Committee has been divided for several months on how much interest rates need to rise to return double-digit inflation to its 2% target and how persistent underlying inflation pressures will be.

February Expectations for Price Increases

According to the survey, businesses expected to raise their prices by 5.4% over the coming year, down from 5.8% in January, and the smallest planned increase since February 2022, when Russia's invasion of Ukraine caused a surge in energy costs.

Planned Wage Increases Remain the Same

The businesses surveyed in February plan to raise wages by 5.7% over the next year, the same as in January. This measure was last lower in August.

Inflation Downward Path Evidence

For some policymakers, the survey results may be evidence that inflation is now firmly on a downward path and will accelerate as the effect of past interest rate rises spreads through the economy.

Still Twice the Average Before COVID-19 Pandemic

However, the planned wage and price increase scale is still around twice their average before the COVID-19 pandemic, when inflation was near its 2% target.

Consumer Price Inflation Expectations

Businesses said they expected consumer price inflation to fall to 5.9% in one year and to be 3.4% in three years, in contrast to the Bank of England's forecast last month that inflation would be below its 2% target by the second half of next year.

Andrew Bailey, Bank of England Governor
Andrew Bailey, Bank of England Governor

BoE Governor Andrew Bailey's Statement

BoE Governor Andrew Bailey stated in a speech that it is uncertain whether the central bank will need to raise interest rates further and will depend on policymakers' wage and price pressures assessment.

Financial Market Expectations

Financial markets expect the Bank of England to raise interest rates to 4.25% from 4% later this month and for rates to peak at 4.75% in the year's second half.

Survey Methodology

The Bank of England's monthly Decision Maker Panel survey was based on responses from 2,462 chief financial officers between February 3 and February 17.