Finance
UK Inflation to Average 2.5% in 2026, Obr Forecasts
Published by Global Banking & Finance Review®
Posted on December 8, 2025
1 min readLast updated: January 20, 2026
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Published by Global Banking & Finance Review®
Posted on December 8, 2025
1 min readLast updated: January 20, 2026
Add as preferred source on GoogleThe OBR forecasts UK inflation to average 2.5% in 2026, with current inflation at 3.6%. The Bank of England may cut interest rates soon.
LONDON (Reuters) -British consumer price inflation is set to average 2.5% in 2026, according to estimates by the Office for Budget Responsibility published on its website on Wednesday ahead of finance minister Rachel Reeves' budget statement.
In March, when Reeves announced a half-yearly budget update, the OBR said it expected inflation of 2.1% in 2026, only slightly above the Bank of England's 2% target.
However, inflation in the 12 months to October stood a 3.6%.
The OBR upgraded its inflation forecast for 2025 by 0.2 percentage points to 3.5%.
The country's budget watchdog expects price growth to return to the 2% in 2027, a year later than it forecast in March.
Official data, published last week, showed inflation cooled to 3.6% in annual terms in October, bolstering market expectations of a quarter-point cut in interest rates by the Bank of England in December.
(Reporting by David Milliken and Andy Bruce; writing by Suban Abdulla; editing by William James)
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is usually measured as an annual percentage change.
The consumer price index (CPI) measures the average change over time in the prices paid by consumers for a basket of goods and services. It is a key indicator of inflation.
Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage. They are influenced by central banks and affect economic activity.
The Bank of England's target inflation rate is 2%. This target is set to maintain price stability and support economic growth.
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