UK Watch: Forecast update: Data and milder gas delays hike call

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UK Watch: Forecast update: Data and milder gas delays hike call

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UK Watch

Forecast update: Data and milder gas

delays hike call

We incorporate lower gas prices in our outlook 21 May 2026 Corrected

We adjust our UK macro forecasts to incorporate our commodities strategists new, Macro

lower natural gas price forecasts in our scenario. United Kingdom

Lower inflation profile with peak at 3.7% BofABofA EuropeEuro Economics(Madrid)

We lower inflation to 3.3% (-20bps) and 2.4% (-10bps) in 2026/27 due to softer gas +44 20 7995 1476 europeaneconomics@bofa.com

profile, weaker than expected April inflation and planned cancellation of 5p rise in fuel Sonali Punhani

duty from September. Inflation is now likely to peak at 3.7% in Q4 2026 (vs 4.1% before) UK Economist

and falls slightly below target in H2 2027. MLI+44 (UK)20 7996 1032

sonali.punhani@bofa.com

Higher growth Ruben Segura-Cayuela

We raise growth forecasts to 1.0% in 2026 (+40bp) and keep it unchanged at 1.1% in EuropeBofA EuropeEconomist(Madrid)

2027. This is driven by a lower gas shock and the stronger than expected Q1 GDP. But +34 91 514 3053

ruben.segura-cayuela@bofa.com

we think Q1 GDP outperformance is unlikely to last with high energy prices squeezing

consumption/investment and political uncertainty weighing on growth. AgneRates Stengeryte,Strategist CFA

MLI (UK)

We delay the timing of BoE hikes to July and September agne.stengeryte@bofa.com

We now expect the BoE to hike in July and September (vs June and July before) to 4.25%, Mark Capleton

Rates Strategist

with risks of one hike as before. Softer gas profile than we were expecting, dovish MLI (UK)

inflation/labour market data and lack of explicit guidance on June from the BoE in recent mark.capleton@bofa.com