UK February wage growth expectations are expected to remain at multi-year lows, but the Bank of England still faces the risk of energy-driven inflation in its interest rate path.

A survey released by the Bank of England shows that in February, UK employers' expectations for wage growth remained at the lowest level in nearly four years. The Bank of England is closely monitoring further signs of slowing wage pressure before deciding whether to cut interest rates. The monthly Decision Maker Panel survey released on Thursday showed that employers' expectations for wage growth in the coming year (calculated as a three-month moving average) remained at 3.6% in February, the lowest level since the series began in 2022. Expectations for the extent of their own price increases over the next 12 months have slightly decreased, falling by 0.1 percentage points to 3.4% in the three months to February. Firms also indicated that they expect employee numbers to increase by 0.1% in the next year. The Bank of England is closely monitoring wage growth to assess inflation pressures still present in the economy. Following the decision to keep interest rates unchanged in February, it is expected that the Bank will continue to maintain rates at 3.75% this month. This week, investors reduced their expectations of a rate cut by the Bank of England, as escalating tensions between the US and Iran have heightened concerns about inflation. They now expect a rate cut of only 25 basis points this year. The Bank of England conducted this survey before the recent outbreak of Middle East conflict.