UK OBR forecasts GDP growth slowing from 1.25% in 2026 to 1.0% in 2027, while CPI inflation is expected to reach 3.5% in 2027 (vs prev. 2% seen in March)

• Borrowing could be GBP 17bln above its central forecast in 2027/28 if energy prices reach a higher and more sustained peak.
• Significantly better or worse outcomes for the public finances and economy are broadly equally likely.
• The rise in interest rates and increase in the inflation forecast leaves pre-measures borrowing an average of GBP 11bln per year higher than in March.

OBR forecast rounds accompany the UK fiscal statement and historically set the parameters for the gilt supply outlook, since the watchdog's borrowing projections feed directly into the Debt Management Office remit revision that follows. The pattern from past rounds is that the market focuses less on the growth profile than on the fiscal headroom and the implied change to gilt issuance: upward revisions to borrowing driven by higher rate and inflation assumptions, as here, have tended to cheapen the long end and steepen the curve, with index-linked supply also in scope when the inflation path is revised up. The scenario language matters as much as the central case: stress cases around energy prices have in prior episodes been used to frame the size of any buffer the Chancellor retains, and a symmetric risk statement of this kind keeps the tail outcomes in play for the fiscal rules debate. The transmission channels to watch are the updated DME remit, the split between conventional and linker issuance, and any change to debt interest costs, which the OBR has previously identified as the most volatile line in the forecast. Attention then shifts to how far the Bank of England's rate path assumptions, which the OBR takes as given, diverge from market pricing.