British businesses showed little sign of lowering their price expectations in June despite easing tensions in the Middle East, according to the latest Bank of England Decision Maker Panel survey.
The survey found that companies expect their prices to increase by 4.1% over the next 12 months on a three-month moving average basis, up from 4.0% in May and the highest level since early 2024, indicating that higher energy costs continue to influence corporate pricing strategies.
On a one-month basis, businesses’ year-ahead price expectations remained unchanged at 4.0%, suggesting firms are still planning to pass higher costs on to customers.
Expected wage growth also edged higher, with businesses forecasting average pay increases of 3.5% over the next year, up from 3.4% in the previous three-month period.
The Bank of England kept interest rates unchanged in June and continues to monitor how elevated energy prices feed through into inflation via higher business costs and wage settlements.
“A hawkish-tilting DMP survey will keep the MPC on track for an extended rate hold, with risks of a hike still higher than those of a cut,” Rob Wood, chief UK economist at Pantheon Macroeconomics, said.
Financial markets currently believe an interest rate increase before the end of the year is more likely than not, although a full quarter-point rise in the Bank Rate is not currently priced in until April 2027.
