The Bank of England predicts that measures set out in the Budget will reduce the UK’s headline inflation rate. Appearing before the Treasury Select Committee, Bank staff agreed with the Office for Budget Responsibility that measures announced by the Chancellor would strip 0.5 percentage points off headline inflation by mid-2026. Clare Lombardelli, a deputy governor at the Bank and a member of the rate-setting Monetary Policy Committee, voiced concern about high inflation expectations among consumers and businesses, saying this could push price growth higher than forecasts suggest. Saying that she worries about the “upside risks to inflation,” she noted that “we are seeing pressure on resources in the economy.” The Bank is expected to cut interest rates next week, with financial markets predicting that borrowing costs will be cut to 3.75%, down from 4%.
