The Bank of England expects CPI inflation to peak at 4.9% in the second quarter of 2027, Business Matters reports. That is consistent with the earlier report of a peak of around 5% by mid-2027.
Governor Andrew Bailey said a further rise may be needed unless there is real progress on the Middle East conflict. Explaining the rise to 4%, he said:
"There is now enough inflationary pressure in the pipeline caused by the rise in energy prices, that an increase in Bank rate is warranted."
The Bank warned that at least one more increase was likely if the US-Iran conflict continues, Reuters reports.
Business Matters reports that traders now expect Bank Rate to reach 5% over the next 12 months. This is a reading of market pricing, not an official forecast. David Rees of Schroders expects rates to peak at 4.25%, well below that, according to Reuters.