UK firms trim wage expectations but inflation pressures remain

LONDON, Jan 8 (Reuters) - British ⁠companies slightly ⁠lowered ‍their still-high expectations for growth in wages and prices, according to a survey published by the Bank ‍of England that underscored why the central bank is ​likely to remain cautious about interest rate cuts this year.

The monthly Decision ​Maker Panel, released on Thursday, showed businesses saw wage growth of 3.7% over the 12 months from the final quarter of 2025, down by only ​0.1 percentage points from the three months to November.

Firms' expectations for their own price inflation in the year ahead ​also barely fell, edging down by 0.1 percentage points to 3.6% in the three ‌months to December.

Expectations for employment growth over the next year weakened slightly, the BoE said.

Rob Wood, ​chief UK economist at Pantheon Macroeconomics, ⁠said the survey suggested firms were putting behind them months of speculation about finance minister Rachel ‌Reeves' budget which she announced in late November, but wage growth and inflation remained too high for comfort for the BoE.

"The Monetary Policy ‌Committee will have to be cautious, so we are comfortable assuming only ‌one more rate cut this year," Wood said.

The BoE survey showed companies expected consumer price inflation of 3.4% in the coming 12 months, the ‍same as in November and way above the central bank's 2% target.

Britain's headline rate of inflation ⁠fell to 3.2% in November, and the BoE cut interest rates to 3.75% in December from 4%. Financial markets are pricing in one or two quarter-point cuts in 2026.

($1 = 0.7444 pounds)

(Reporting by Suban AbdullaEditing by William Schomberg)

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