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

 

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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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