Bank of England in London, Britain
A general view of the Bank of England (BoE) building in London, Britain, August 4, 2022. Reuters

British businesses scaled back plans for price rises in February but overall intentions for price and wage increases remain high, according to a Bank of England survey which is unlikely to resolve policymakers' disagreements on the inflation outlook.

The BoE's Monetary Policy Committee has been split for several months over how much further interest rates need to rise to return double-digit inflation to its 2% target, and how persistent underlying inflation pressures will prove.

Businesses surveyed in February expected to raise their prices by 5.4% over the coming year, down from 5.8% in January and the smallest planned increase since February 2022, when Russia's invasion of Ukraine caused a surge in energy costs.

Businesses plan to raise wages by 5.7% over the next year, the same as in January. The measure was last lower in August.

For some policymakers, this may be evidence that inflation is now firmly on a downward path, which will accelerate as the effect of past interest rate rises spreads through the economy.

However, the scale of planned wage and price increases is still around twice their average before the COVID-19 pandemic, when inflation was near its 2% target.

Businesses said they expected consumer price inflation to fall to 5.9% in one year's time and to be 3.4% in three years - in contrast to the BoE's forecast last month that inflation would be below its 2% target by the second half of next year.

BoE Governor Andrew Bailey said in a speech on Wednesday that it was uncertain whether the central bank would need to raise interest rates further, and that it would depend on policymakers' assessment of wage and price pressures.

Financial markets expect the BoE to raise rates to 4.25% from 4% later this month, and for rates to peak at 4.75% in the second half of the year.

The BoE's monthly Decision Maker Panel survey was based on responses from 2,462 chief financial officers between Feb. 3 and Feb. 17.