Overview

• The OECD lifts UK inflation projections to 3.5% for 2025 and 2.7% for 2026, the highest in the G7 over the next two years.
• GDP growth is forecast at 1.4% in 2025 and 1.0% in 2026, with food prices identified as a major driver of inflation pressures.
• Long-dated gilt yields have climbed, with 30-year yields topping about 5.5% in recent weeks as markets factor persistent inflation and weak growth.
• The Bank of England held the base rate at 4% last week, markets expect no further cuts this year, and the OECD anticipates gradual easing next year.
• Political pressure is intensifying on Rachel Reeves before November, with reports of a potential public finance shortfall of up to £50bn and speculation the OBR may cut productivity estimates.