BoE Projects Inflation Easing Below Target, Economic Growth to Strengthen

The Bank of England has released its central projections for the UK economy, outlining three possible scenarios after keeping its benchmark interest rate unchanged at 3.75%. Under its central projection, inflation is expected to peak at 3.2% in the fourth quarter of 2026 before easing below the 2% target to 1.7% in the first quarter of 2028.

The central bank forecasts economic growth will remain steady at an annual rate of 1.1% in both the third quarter of 2026 and the third quarter of 2027, before accelerating to 1.7% in the third quarter of 2028 and moderating slightly to 1.6% a year later.

The central scenario assumes oil prices will gradually ease from around $76 per barrel during the third quarter of 2026 to about $71 by the end of the forecast period, while natural gas futures are expected to peak at just over 123 pence per therm in the fourth quarter before falling to just under 60 pence by the end of the forecast horizon.