UK inflation forecast raised as budget watchdog sees 3.4% average in 2027
Britain's inflation outlook is worsening after John Healey's first budget, with official forecasts now pointing to stronger price growth over the next several years. The revised path reflects higher energy costs linked to the Iran war, after September inflation rose more than expected to its highest level since October 2025.
Highlights
- Office for Budget Responsibility now forecasts UK inflation to average 3.4% in 2027, up from a prior 2% projection after John Healey's budget.
- The OBR expects inflation to peak at 3.75% in early 2027, then average 2.1% in 2028–2029 and 2% in 2030.
- Latest OBR inflation upward revisions reflect energy price surges since Iran war began, with September inflation hitting 3.5%, highest since October 2025.
Revised inflation path after Healey budget
As reported by Reuters, the Office for Budget Responsibility says British inflation is set to average 3.4% in 2027 following finance minister John Healey's first budget. The budget watchdog expects price growth to peak at 3.75% in early 2027.It then sees inflation averaging 2.1% in 2028 and 2029, before reaching 2% in 2030. These forecasts mark a clear upward revision from the OBR's previous outlook.
Energy prices drive higher projections
The OBR had previously projected inflation at 2% in each year from 2027 to 2030, based on forecasts prepared before the Iran war broke out at the end of February. The latest revisions incorporate the effect of the energy price surge that has since gathered pace.Data published last week showed British inflation rose more than expected to 3.5% in September. That was the highest reading since October 2025, underlining the renewed pressure on prices as energy costs climb.
Our earlier coverage of Bank of England Deputy Governor Sarah Breeden’s comments on the UK energy price shock noted that the economy had held up better than initially feared, helped by policy support and interventions that steadied markets. The piece also stressed that inflation and market volatility remained key risks, with policymakers focused on close monitoring and the ability to adapt as energy costs stay elevated.
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