UK inflation to peak at 4.4% around start of 2027, FT survey shows

British inflation is set to peak at an average 4.4% around the start of 2027, well above official forecasts, a Financial Times survey of economists showed, hours before the Bank of England is expected to raise interest rates.

The survey of 12 economists was conducted this week, the FT reported on Thursday. Most expect price growth to reach its highest level in the first quarter of 2027. All but one expect a peak above 4.1%, and five forecast a peak of between 4.5% and 5%.

The Bank of England will set out its own inflation and growth outlook at midday on Thursday after a meeting widely expected to agree a quarter-point rise in its key interest rate.

The economists’ forecasts are higher than the Office for Budget Responsibility’s projection, published last week, of a 3.8% peak in the first quarter of next year.

The OBR based its forecasts on oil and gas prices from mid-August, before a re-escalation in the Middle East war pushed them sharply higher.

The OBR said its inflation forecast for early 2027 would have been “somewhat higher” at current market prices. Oil prices fell on Wednesday after a report of diplomatic progress between the United States and Iran.

Ofgem’s energy price cap is on track to rise by over 25% in January, and household energy bills are set to jump by nearly £470 to about £2,200 a year for a typical household, according to EDF Energy’s estimates.

Inflation was 3.5% in September, its highest in almost a year. A 4.4% reading would be the fastest since October 2023, when it hit 4.6%.

The most common forecast among them for the BoE’s benchmark rate peak is 4.25%, which implies two quarter-point increases. Traders are fully pricing in four quarter-point increases by the end of next year.