Feb 2, 2023
UK Finance Chiefs’ Price Fears Cooled Significantly, Says BOE
(Bloomberg) -- UK finance directors were a little less concerned about inflation and soaring wages at the start of 2023, a Bank of England survey showed in an indication that some frictions in hiring staff also are dissipating.
The central bank’s survey of chief financial officers showed companies expect inflation to be 6.4% in a year’s time, a percentage point lower than the 7.4% predicted in December. Businesses also expected weaker pay growth ahead of 5.7%, down 0.6 percentage points.
The figures add to signs that inflation may be past its peak, but they’re also still rising much more quickly than the BOE’s 2% target. Governor Andrew Bailey on Thursday said the UK has a long way to go in bringing inflation back to target but that he hoped the UK has turned the corner.
Signs of wage and price expectations abating in company boardrooms will embolden hopes at the BOE that headline inflation will drop rapidly this year. Inflation has fallen two months in a row since peaking at over 11% but wages are still accelerating.
BOE officials view the tight labor market as crucial to the UK’s inflation fight, since pay growth is fueled by a shortage of workers available to fill jobs.
The BOE Decision Maker Panel survey suggested that businesses are finding it easier to hire staff and curtailing their hiring plans, a possible sign that the jobs market is loosening.
Some 35% of firms said they are finding recruitment “much harder”, the lowest share since the BOE started asking about hiring difficulties in October 2021. It is far lower than the peak of 66% last summer.
Expectations for employment growth over the next 12 months also tumbled 0.7 percentage points to 1.2% last month.
Bailey said that “domestic wage and price dynamics could prove more persistent” than predicted after finding evidence that pay pressures have been stronger than expected.
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