UK think tank NIESR slightly raises economic growth forecast, warns inflation will persist until 2029

Glonghui, July 29｜A major UK think tank’s forecast released a day before the Bank of England announces its rate decision shows that, despite the energy price shock caused by the Iran war, the resilience of the UK economy has exceeded expectations; however, inflation is expected to remain above the central bank’s target level until 2029. The National Institute of Economic and Social Research (NIESR) said on Wednesday that UK gross domestic product (GDP) is expected to grow by 1.1% year-on-year in 2026, higher than the 0.9% increase forecast in April. “In the first half of this year, the UK economy showed unexpected resilience, but a slowdown will still occur. Even if the Middle East situation returns to peace relatively quickly, inflation will still rise and the new Chancellor of the Exchequer will have to make some tough decisions,” said Stephen Millard, NIESR’s deputy director for macroeconomics. The institute expects the average inflation rate in 2026 to reach 3.1%, higher than the 2.6% predicted in June. Inflation is projected to peak at 3.8% in February 2027, below the 4.1% forecast in April. Inflation is not expected to return to the target level until 2029, a year later than previously forecast.