BoE Forecasts (Feb.): Lowers inflation forecasts across horizon, lowers GDP forecast for Q1 26 and Q1 27

The BoE has lowered its inflation forecasts across the 2026-2029 horizon, which is a notable shift suggesting persistent disinflationary pressure.

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BoE Forecasts (Feb.): Lowers inflation forecasts across horizon, lowers GDP forecast for Q1 26 and Q1 27

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Inflation

  • 2026 Q1: 3.0% (Prev. 3.1%; exp. GS: 2.9%, MS: 3.0%)
  • 2027 Q1: 1.7% (Prev. 2.2%; exp. GS: 1.8%, MS: 1.8%)
  • 2028 Q1: 1.8% (Prev. 2.1%; exp. GS: 2.2%, MS: 2.0%)
  • 2029 Q1: 2.0% (Prev. N/A; exp. GS: 2.2%, MS: 1.9%)

GDP

  • 2026 Q1: 0.8% (Prev. 1.1%; exp. GS: 0.8%, MS: 0.8%)
  • 2027 Q1: 1.2% (Prev. 1.5%; exp. GS: 1.8%, MS: 1.5%)
  • 2028 Q1: 1.9% (Prev. 1.8%; exp. GS: 1.8%, MS: 1.7%)
  • 2029 Q1: 1.8% (Prev. N/A; exp. GS: 1.7%, MS: 1.7%)

GS = Goldman Sachs, MS = Morgan Stanley

Unemployment Rate

  • 2026 Q1: 5.2% (prev. 5.0%)
  • 2027 Q1: 5.3% (prev. 5.0%)
  • 2028 Q1: 5.1% (prev. 4.9%)
  • 2029 Q1: 4.9% (prev. N/A).

Bank Rate

  • 2026 Q1: 3.7% (prev. 3.8%)
  • 2027 Q1: 3.3% (prev. 3.5%)
  • 2028 Q1: 3.5% (prev. 3.6%)
  • 2029 Q1: 3.7% (prev. N/A).
Context

Alongside this, GDP forecasts have also been revised downward for Q1 2026 and Q1 2027, indicating weaker economic growth than previously expected. This signals a dovish outlook that could impact interest rate expectations and overall market sentiment regarding the UK economic trajectory.

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