UK Inflation to Average 3.4% in 2027, Budget Watchdog OBR Says

UK Inflation to Average 3.4% in 2027, Budget Watchdog OBR Says

British inflation is set to average 3.4% in 2027, the country's budget watchdog said on Wednesday, following finance minister John Healey's first budget. The Office for Budget Responsibility (OBR) expects price growth to peak at 3.75% in early 2027, before easing to an average of 2.1% in both 2028 and 2029 and reaching 2% in 2030. The forecast is a sharp upward revision from the watchdog's previous outlook, which was prepared before the Iran war broke out at the end of February and saw inflation at 2% in each year from 2027 to 2030.

The gloomier outlook follows a bigger-than-expected rise in inflation to 3.5% in September, its highest level since October 2025, driven by a surge in energy prices linked to the Iran war. The OBR's numbers matter because they shape how much room the government has to spend and how long households face pressure on bills, food and transport costs. With the cost of living central to Britain's political debate, the forecast puts rising prices back in the spotlight.

For ordinary families, the message is mixed. Inflation is expected to stay well above target through next year, peaking in the early months of 2027, but the watchdog still sees it falling back toward 2% by the end of the decade. The government will hope that easing energy costs and slower price rises later in the forecast help that path hold, while economists warn that any fresh energy shock could push the peak higher still.

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