British businesses expect to increase prices by 4.0% over the next 12 months, down from a two-year high of 4.4% in April, according to the Bank of England's Decision Maker Panel survey. The moderation follows the initial shock from energy price rises caused by the US-Israeli war on Iran in late February. The survey of over 2,000 companies showed 57% expect to raise prices in response to energy costs, down 7 percentage points from April, whilst 68% anticipate lower profit margins. Companies also plan to reduce employment by 0.4% over the next year, the largest planned cut in six months, whilst wage growth expectations held steady at 3.4%. Financial markets expect the BoE to maintain rates at 3.75% this month.

The Bank of England will warn City leaders about risks from Claude Mythos, a new AI system from Anthropic deemed too dangerous for public release. The tool can discover hidden computer system flaws faster than humans, raising concerns it could breach financial system security. Duncan Mackinnon, the Bank's risk chief, will chair a Cross Market Operational Resilience Group meeting within a fortnight to discuss the threat. Treasury officials, the Financial Conduct Authority and National Cyber Security Centre will attend. The alarm follows a crisis meeting this week between US Treasury Secretary Scott Bessent, Federal Reserve Chairman Jerome Powell and Wall Street executives. The UK's AI Security Institute is testing Mythos to develop defences, whilst Anthropic has enrolled tech giants including Apple, Microsoft and Amazon to identify vulnerabilities in their software through Project Glasswing.

The Bank of England received 712 applications for its voluntary resignation scheme, with 446 staff — approximately 8% of employees — ultimately departing. The Bank will pay £36 million in settlements, averaging £81,000 per person. The departures are part of efforts to save £45 million, or 8% of operating costs, to fund an overhaul of the Bank's forecasting systems following recommendations by former Federal Reserve chair Ben Bernanke. His 2024 report criticised the Bank's "out of date" and "not adequately maintained" forecasting infrastructure. The voluntary scheme will account for £35 million in savings, with a further £10 million needed from elsewhere. Governor Andrew Bailey warned that compulsory redundancies cannot be ruled out, despite the current scheme being entirely voluntary.