Britain's economy has been more resilient than anticipated after the energy price shock caused by the Iran war, but inflation will stay above the Bank of England's target until 2029, according to projections from a leading think tank published a day before the Bank of England sets interest rates.
The National Institute of Economic and Social Research said on Wednesday that gross domestic product is forecast to expand at an annual rate of 1.1% in 2026, up from 0.9% in its previous forecast in April.
"The UK economy proved to be surprisingly resilient in the first half of this year, but a slowdown is still to come. Even if peace is restored relatively quickly in the Middle East, inflation will still rise and the new Chancellor will need to make some difficult decisions," said Stephen Millard, NIESR's deputy director for macroeconomics.
