UK inflation to average 2.5% in 2026, OBR forecasts

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)

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