LONDON (Reuters) – British businesses have lowered their inflation expectations and the level of price increases over the coming year, a survey by the Bank of England (BoE) showed on Thursday, which revives the hope that inflation could return to the target set.

Companies surveyed by the BoE, in the three to months to August, now expect consumer price inflation to decelerate to 4.8% and their prices to rise 4.9% on the coming year, the lowest level since February 2022, when Russia invaded Ukraine.

In the survey for the three months to July, companies forecast inflation at 5.4% and a rise in their prices of 5.2% respectively.

Examination of the more volatile monthly data shows that expectations for producer price inflation fell from 5.5% in July to 4.4% in August, the lowest level since October 2021.

The BoE had not then started the current cycle of monetary tightening, which began in December 2021 and has so far resulted in 14 consecutive interest rate hikes.

Bank of England Governor Andrew Bailey told a parliamentary committee on Wednesday that the central bank was now “much closer” to the end of its cycle of rising credit costs.

However, he did not rule out further monetary tightening this month, when the bank’s main key rate is now at 5.25%.

Inflation in Britain peaked in October 2022 at a 41-year high, at 11.1%, before gradually slowing to 6.8% in July. Andrew Bailey said inflation could pick up again in August before slowing again.

The Bank of England wants to bring inflation down to 2% by early 2025 as the slowdown in prices remains less marked in Britain than in other major economies.

With regard to wage growth, companies’ outlook remained unchanged compared to expectations formulated in July when they expected a rise of 5.0% for the coming year.

(Report David Milliken, Claude Chendjou, edited by Jean-Stéphane Brosse)

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