British Inflation Forecast: Expectations and Adjustments for 2026

The Office for Budget Responsibility has projected British consumer price inflation to average 2.5% in 2026, revising its forecast from an earlier 2.1%. The inflation rate for October was 3.6%, prompting a reevaluation. The forecast anticipates a return to the Bank of England's 2% target by 2027.

The Office for Budget Responsibility (OBR) has revised its forecast for British consumer price inflation, now predicting an average rate of 2.5% for 2026. This update comes as finance minister Rachel Reeves prepares to deliver her budget statement.

Back in March, the OBR had anticipated an inflation rate of 2.1% for 2026, only marginally above the Bank of England's target of 2%. However, recent data shows that inflation for the year up to October stands at 3.6%, prompting an upward adjustment for 2025 to 3.5%.

The budget watchdog now expects inflation to revert to the 2% target by 2027, a year later than previously anticipated. Market anticipation of a quarter-point interest rate cut by the Bank of England in December has been bolstered by the latest cooling inflation data.

(With inputs from agencies.)