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Free AccessMNI BRIEF: NIESR Sees UK Inflation, Bank Rate High-for-Longer
Stubborn core inflation will push headline inflation higher and force the Bank of England to keep its policy rate higher-for-longer, following an expected 25 basis points hike Thursday, the National Institute of Economic and Social Research predicted.
NIESR expects inflation to only get back to around its 2.0% in two-and-a-half year with Bank Rate, currently at 4.25% likely to peak at 4.75% but to then stay around there and fall back only very gradually, hitting 3.25% in 2027.
"There is no obvious evidence that we have reached the peak in core inflation," NIESR Deputy Director Stephen Millard said, adding that it was also clear that the neutral, or non-contractionary or expansionary, rate had moved higher.
A tight labour maket and higher inflation expectations are all pushing up on core inflation and Prime Minister Rishi Sunak's pledge to oversee inflation halving in 2023 is at risk on NIESR's projections, which show CPI at 5.4% by the end of this year compared with 10.1% on its March reading.
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