Businesses expect costs and inflation to ease in the coming year.

Businesses expect costs and inflation to ease in the coming year, but wage pressures to remain high, according to a Bank of England survey yesterday that could deepen divisions among policymakers on future interest rate rises.

Responding to the central bank’s monthly decision-maker panel for February, business leaders forecast output prices to increase 5.4 per cent in the coming year. That is down from 5.8 per cent in January and the lowest level since February 2022.

That was unchanged from the previous month but down from a peak of 6.3 per cent in December. Realised annual wage growth rose month on month by 0.3 per cent to 6.6 per cent.

Meanwhile, cost pressures stayed high, rising 9.8 per cent in the year to February, broadly unchanged from the previous month. But cost growth for the year ahead was forecast to ease to a rate of 7 per cent, down from 8 per cent in January.

Members of the BoE’s Monetary Policy Committee have been split over interest rate raises at their recent meetings, with two voting to leave the rate unchanged in February and December. The combination of falling inflation expectations alongside strong wage pressures in yesterday’s data is likely to reinforce that divide.

Markets are pricing in a rise of 25 basis points at the next MPC meeting on March 23, a slowdown from the 50bp increase in February.

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