The British Chambers of Commerce (BCC) has issued a stark warning about the UK’s inflation outlook, projecting that consumer price inflation will climb steadily to 2.6% by the end of the year and remain above the Bank of England’s 2% target until early 2027. According to the BCC’s latest quarterly forecasts, high energy prices, robust wage growth, and global trade uncertainty are expected to keep price growth elevated for at least another two years.
This persistent inflationary pressure is likely to force the Bank of England into a cautious approach to interest rate cuts. The BCC anticipates that the central bank will implement incremental interest rate reductions of 0.1 percentage points over the next year. This conservative strategy is expected to bring the base rate down from its current 5% to 4.9% by the end of this year, with further cuts to 4.3% by the end of 2025 and 3.8% by the end of 2026.
The lobby group’s inflation projections paint a more pessimistic picture than the Bank of England’s own forecasts, which predict inflation falling and stabilising around the 2% target from 2026. Current consumer price inflation stands at 2.2% and rose for the first time in six months in July, driven by higher global energy costs. Economic growth is expected to be modest, with the BCC forecasting 1.1% growth this year and 1% next year.
Vicky Pryce, head of the BCC’s economic advisory council, commented that UK growth is “unlikely to be heading into the fast lane any time soon” due to ongoing global economic and political uncertainty, as well as a downbeat government assessment of its fiscal position. The BCC’s outlook suggests that businesses and consumers alike should brace for a prolonged period of above-target inflation and cautious monetary policy adjustments from the Bank of England. This economic landscape may present challenges for investment and growth in the coming years.
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