UK businesses to increase use of dynamic prices, BoE survey finds

{"text":[[{"start":9.3,"text":"Almost a third of UK companies plan to use algorithmic tools to set prices in response to market conditions, according to Bank of England analysis that suggests it will become more challenging for the central bank to track trends in inflation. "}],[{"start":26.04,"text":"Clare Lombardelli, the central bank’s deputy governor for monetary policy, said in an article published on Tuesday that all sectors were set to increase their use of dynamic and personalised pricing over the next year, judging by BoE surveys of business leaders. "}],[{"start":44.22,"text":"The sharpest increase will be in the use of tools that adjust prices in response to changes in demand, capacity or competitors’ moves, she wrote — with 31 per cent of firms planning to use these tools in a year’s time, compared with 21 per cent now. "}],[{"start":63.76,"text":"This type of market-responsive algorithmic pricing has already become standard practice on online travel sites, where around 80 per cent of hotel room rates change price at least once per month. This has led to unexpected price spikes with the potential to skew the headline figure for UK inflation when a festival, football tournament or major concert leads to a rush for rooms."}],[{"start":90.69,"text":"Surge pricing strategies are already politically controversial with sky-high prices for the reunion tour of Oasis prompting UK Prime Minister Sir Keir Starmer to launch a regulatory review of ticketing practices in 2024. "}],[{"start":107.02,"text":"But Lombardelli said their use was likely to spread in other sectors, for example in retail where electronic shelf labels were making it possible to adjust prices more often. "}],[{"start":119.82,"text":"More companies were also adopting personalised pricing strategies, she noted, whether through loyalty cards, more tailored discounts or “nudges” to higher-margin products that mean different customers pay different prices for very similar goods and services. "}],[{"start":137.35,"text":"“A world of more fluid and bespoke prices could make life harder for statisticians,” Lombardelli said, both because it made inflation more volatile and because it strained the whole concept of measuring “representative” prices for a basket of goods and services. "}],[{"start":null,"text":"

"}],[{"start":155.48,"text":"“Households already face different inflation rates because they buy different things,” she wrote. “When prices differ for the same thing, inflation becomes even more personalised — and aggregate measures may no longer reflect households’ experience.” "}],[{"start":174.13,"text":"There was no evidence yet that algorithmic pricing had led to higher inflation overall, she noted, saying that for now, it did “not appear to be an inflationary menace”. "}],[{"start":186.28,"text":"But it could add to the BoE’s worries that household expectations of future inflation are drifting upwards and leading inflationary pressures to become more entrenched. "}],[{"start":198.92000000000002,"text":"Lombardelli said that if dynamic pricing became common for staples like fuel or food that people buy on a daily basis, the fact that prices were changing more frequently “may cause perceptions of inflation to drift upwards — even if average prices do not.”"}],[{"start":227.11,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1775718744_3634.mp3"}