A leading UK think tank released a forecast just a day before the central bank's interest rate decision, indicating that the British economy has shown greater-than-expected resilience despite an energy price shock caused by the Iran conflict. However, inflation is projected to remain above the central bank's target until 2029.

On Wednesday, the National Institute of Economic and Social Research (NIESR) stated that it expects Gross Domestic Product (GDP) to grow by 1.1% year-on-year in 2026, up from a previous forecast of 0.9% growth made in April.

"The UK economy has demonstrated surprising resilience in the first half of this year, but growth will still slow down. Even if peace is restored relatively quickly in the Middle East, inflation will remain elevated, and the new Chancellor of the Exchequer will face some difficult decisions," said Stephen Millard, Deputy Director for Macroeconomics at NIESR. The institute forecasts an average inflation rate of 3.1% for 2026, higher than the 2.6% predicted in June. The inflation rate is expected to peak at 3.8% in February 2027, which is lower than the 4.1% forecast in April. It added that inflation will not return to its target level until 2029, a year later than previously anticipated.

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Editor: Wang Yongsheng