British businesses expect to raise both output prices and wages at a slower pace over the coming year than they did a month ago, according to a Bank of England survey released on Thursday which may ease policymakers' fears that high inflation will persist.
Companies surveyed in May intended to raise prices by 5.1% over the coming year, down from 5.9% in April's survey, the lowest since Russia's invasion of Ukraine in February 2022 and well below the rise of 7.6% recorded over the past 12 months.
Businesses planned to raise wages by 5.2% over the coming year, down from expectations of 5.4% in April and the lowest since July 2022.
BoE policymaker Catherine Mann said on Wednesday that Britain had a worse inflation problem than the United States or the euro zone, amid signs that high headline inflation may have created a persistent upward shift in underlying price- and wage-setting patterns.
Before the COVID-19 pandemic, businesses surveyed by the BoE typically reported plans to raise prices and wages by around 2-3% a year, close to the BoE's 2% inflation target.
The BoE has said it will raise interest rates above their current 4.5% level if inflation looks persistent, and since the release of higher-than-expected April inflation data last week, markets have bet that rates will peak at 5.5% later this year.
Businesses expected CPI to be 5.9% in a year's time, up from 5.6% in April's survey, and for inflation in three years' time to be 3.5%.
