UK Inflation Concerns Rise as Bosses‘ Expectations Hit Two-Year High
London, UK – Concerns about persistent inflation in the United Kingdom are mounting after two key surveys revealed bosses’ expectations for price rises have reached their highest level in two years, even as firms report an employment freeze. The data fuels anxieties that inflationary pressures are proving more stubborn than previously anticipated by the Bank of england, possibly delaying anticipated interest rate cuts.
The surveys – one from the Bank of England and the other a Decision Maker Panel (DMP) survey – add weight to arguments from hawkish members of the monetary Policy Commitee (MPC) who have cautioned against premature easing of monetary policy. Both indicate ongoing wage and price pressures, despite a weakening labor market.
External MPC member Catherine Mann this week cited household expectations for inflation at 3.8 per cent as justification for maintaining interest rates at four per cent for a sustained period, followed by a larger cut to stimulate the economy.”I prefer a longer hold… and make a bigger cut when you do to make it very clear that this is not in response to the financial markets or other things,” she stated at a Bloomberg event. “This is really about the UK economy.”
Rate-setters closely monitor these surveys as they can foreshadow ‘second-round effects’ – such as increased wage demands and businesses raising prices. Rob Wood, chief economist at Pantheon Macroeconomics, noted the DMP survey’s implications: “The DMP survey will keep the MPC cautious. Wage and price pressures remain stubborn, recruitment difficulties slightly worsened despite weak employment and firms’ inflation expectations rose.” He added that the findings support a view of no further rate cuts this year.
Bank of England officials have been increasingly focused on the labour market’s trajectory.Governor Andrew Bailey recently emphasized the MPC’s close observation of jobs data, while Deputy Governor Sarah Breeden suggested further softening could warrant another rate cut. Recent data indicates UK businesses have begun slashing jobs following tax increases.
