MNI BRIEF: UK Firms' One Year Inflation Expectations 9.5% -BOE

Inflation expectations rose markedly in the the Bank of England's September business executive survey, its Decision Makers Panel survey, with year ahead expectations 9.5% -- compared to 8.4% in August -- and 4.8% three years out.

While the rise in expectations would at first glance appear to bolster the case championed by Monetary Policy Committee members Cathy Mann that aggressive tightening is needed to crush inflation expectations and prevent inflation spiraling other measures of inflation pressures in the survey were more mixed. The DMP found that firms expected wage growth to ease back, however, from 6.5% in the 12 months to September to 5.9% over the next 12 months.

Research finds that near term inflation expectations correlate closely with perceived actual inflation, and firms on average put current inflation at 10.2% in September, entailing that they expected it to ease a touch over the next 12 months. Also, firms' output price inflation dipped in September to 7.4% from 7.7% in August. The labour market remained very tight, with 84% of firms reporting that it harder than normal to recruit new employees, down from 86% in August.