The Bank of England said business leaders see inflation accelerating in the years ahead and wage growth strengthening, adding to concerns about upward pressures on prices.
(Bloomberg) — The Bank of England said business leaders see inflation accelerating in the years ahead and wage growth strengthening, adding to concerns about upward pressures on prices.
The UK central bank said its monthly survey of corporate decision makers showed the year-ahead expectation for the Consumer Prices Index advanced to 7.4% last month from 7.2% in November. Wage expectations rose half a percentage point to 6.3%
Policy makers have indicated they’re concerned about the persistence of inflation expectations in the economy after CPI jumped to a four-decade high last year. While the central bank expects that rate to fall sharply later this year, lingering pressures on prices could result in that outlook drifting away from the bank’s 2% target.
What Bloomberg Economics Says …
“The Bank of England’s closely-scrutinized Decision Maker Panel survey for December 2022 will make it a little harder for the central bank to slow the pace of tightening again in February. Our base case is for a 25-basis-point move, but today’s survey — showing a rise in medium-term inflation expectations and wage growth one-year ahead — lifts the odds the BOE delivers another 50-bp hike next month.”
—Ana Andrade and Dan Hanson, Bloomberg Economics. Click for the REACT.
The survey also showed fewer companies reported hiring difficulties, an indication that tightness in the labor market that’s boosting wages may be beginning to ease. Fully 71% of firms said they were having trouble recruiting last month, down from 78% the month before.
The BOE said businesses expected higher interest rates to lead to lower investment and employment in the next year. The survey showed firms may cut investment by 8% and employment by 2% relative to what would have otherwise happened.
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