BofA Securities reduced its 2027 UK growth forecast by 10 basis points to 1.2%, citing persistent energy price pressures and policy uncertainty ahead of the Autumn Budget. The downgrade follows a modest upgrade for 2026, where growth is now projected at 1.2%, up 10 basis points from the prior estimate, reflecting stronger-than-anticipated momentum in the first half of the year.
Inflation projections were also revised higher, with headline CPI expected to peak at 3.5% in November 2026, up from a prior estimate of 3.3%. The broker now forecasts 2026 headline inflation at 3.4%, a 20-basis-point increase, before easing to 2.6% in 2027, up 30 basis points. Core inflation estimates were lifted to 2.8% for 2026 and 2.3% for 2027, while 2028 forecasts remained unchanged at 2.1% for both measures.
Monetary policy expectations were adjusted to reflect a prolonged period of restrictive rates. BofA now expects the Bank of England to hold its benchmark rate through 2026, with a single 25-basis-point reduction to 3.5% not anticipated until November 2027. The outlook for key meetings—September, December, and February—was described as a "close call," with the bar for a September hike deemed exceptionally high.
The labour market showed signs of softening, with the unemployment rate steadying at 4.9% alongside declines in payrolls and job vacancies. BofA projects joblessness will peak at around 5.2% in mid-2025. The brokerage cited higher energy prices and fiscal uncertainty as primary headwinds, though it noted upside risks from resilient services-sector sentiment and potential limited fiscal loosening in the Autumn Budget, provided it avoids tightening financial conditions.
