Bank of England forecasts CPI at 3% in Q1 2027, GDP growth slows to near zero

The Bank of England’s latest Monetary Policy Report projects CPI inflation hitting 3% in early 2027, with GDP growth slowing to near zero by Q3 of this year. CPI inflation came in at 3.3% in March 2026. That’s well above the Bank of England’s 2% target, and projections suggest it will stay above 3% throughout late 2026 before hovering around that level into early 2027. The culprit is largely energy prices, driven higher by escalating conflicts in the Middle East. It’s a supply-side shock, which is the kind central banks hate most because rate hikes punish demand without fixing the underlying problem. GDP growth has been essentially flatlined, estimated at around 0.2% for recent quarters. The Bank projected 0.5% growth for Q1 2026 before a decline, with the trajectory pointing toward near-zero growth by Q3. Against this backdrop, the Monetary Policy Committee voted 8-1 on April 29 to hold the Bank Rate at 3.75%. One dissenting member wanted a 0.25 percentage point increase, essentially arguing the inflation threat warranted tighter policy even at the cost of further economic pain. The Bank of England’s report laid out three potential paths forward, depending largely on how energy pr...