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UK firms trim year-ahead price expectations to 3.9%, still above BoE target

UK firms trim year-ahead price expectations to 3.9%, still above BoE target

Firms’ inflation expectations eased, but a Reuters poll shows economists still expect the Bank of England to keep rates at 3.75% and delay any cut until at least July 2026.

Fact Check
The headline claim is accurate: BoE DMP confirms year-ahead price expectations eased to 3.9%, above the 2% target, and the Reuters poll confirms economists expect rates held at 3.75%. However, the claim's content states the first cut is delayed 'until at least July 2026,' which contradicts the Reuters poll article that explicitly says the median first cut is 'not before July 2027.' The core figures are correct but the rate-cut timing is materially wrong.
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Summary

British businesses expect slightly slower price and wage increases over the next year, according to the Bank of England’s Decision Maker Panel, but inflation expectations remain above target and economists see little near-term relief from monetary policy. Firms’ year-ahead price growth expectations fell to 3.9% in the three months to July from 4.1% in the three months to June, while year-ahead wage growth expectations edged down 0.1 percentage points to 3.4%. That moderation came after a ceasefire in the Iran war briefly lowered energy prices, but the broader inflation backdrop remains firm. A July 21-24 Reuters poll of 70 economists found all expected the Bank of England to leave Bank Rate unchanged at 3.75% on Thursday. A majority of 58 respondents saw rates staying at that level through 2026, while eight expected a 25-basis-point increase and four forecast a cut to 3.50%. Median forecasts in the poll showed the first 25-basis-point reduction would not come until at least July next year, followed by another in the fourth quarter. The poll also found inflation was expected to peak at 3.3% next quarter and not return to the Bank’s 2.0% target until the end of 2027, with growth forecasts unchanged at 1.0% this year and 1.1% next year.

Terms & Concepts
  • Decision Maker Panel: A Bank of England survey of businesses used to gauge corporate expectations on prices, wages and economic conditions.
  • Bank Rate: The Bank of England’s main policy interest rate, which influences borrowing costs across the economy.
  • 25-basis-point: A quarter-percentage-point change in an interest rate, equal to 0.25 percentage points.