British businesses' expectations for inflation over the coming years dropped last month, but they expected wage growth to remain at a level higher than most Bank of England policymakers want, a BoE survey showed on Thursday.

Businesses said they expected inflation in one year's time to be 3.3%, down from an expectation of 3.4% in January, and the lowest since the survey started asking this question in May 2022. Firms planned to increase their own prices by an average of 4.1% - the lowest planned increase since September 2021.

Last month the BoE shifted its stance to consider cutting interest rates from their 14-year high of 5.25%, but most policymakers said they wanted clear evidence of slower wage growth and services price inflation before doing so.

Thursday's survey showed expected wage growth over the coming year unchanged at 5.2% on the three-month moving average basis which the BoE focused on, although on a single-month basis it dropped to 4.9%, the lowest since May 2022.

Before the COVID-19 pandemic, when inflation was close to the BoE's 2% target, annual growth in basic pay was around 3%, compared with more than 6% in the most recent official figures.

Businesses said they expected to increases staffing levels at a slower pace than previously, consistent with other signs that Britain's job market is cooling. Firms said they expected employment growth of 1.6% over the next 12 months, compared with growth of 2.3% over the past year.

The BoE's Decision Maker Panel survey was based on 2,373 responses between Feb. 2 and Feb. 16.

(Reporting by David Milliken; Editing by Alex Richardson and Andy Bruce)