The Bank of England's recent survey indicates a further cooling in UK employers' wage growth expectations for January. According to Jin10, the central bank is closely monitoring signs of slowing wage increases to determine the timing of potential interest rate cuts. The survey shows that, based on a three-month moving average, businesses' expectations for wage growth over the next year fell by 0.1 percentage points to 3.6% in January, matching the lowest level since the data was first released in 2022. Expectations for price increases over the next year also slightly decreased, dropping by 0.1 percentage points to 3.5% in the three months ending in January.
The Bank of England maintained interest rates at 3.75% on Thursday, with market predictions suggesting one or two 25 basis point cuts by 2026. Despite the overall inflation rate rising to 3.4% in December, the central bank noted that if the anticipated sharp decline in inflation from April proves persistent, there remains room for further rate cuts this year. The survey also reveals that businesses expect overall inflation for the next year to be 3.2%, down from 3.4% in the three months ending December. Additionally, companies anticipate a 0.2% reduction in employment levels over the next year, compared to a 0.4% decline expected in the December survey.