The Office for Budget Responsibility expects inflation to drop below 2 per cent in Autumn, while GDP is forecast to expand by 0.8 per cent this year.
Speaking at the Budget this afternoon (March 6), chancellor Jeremy Hunt said this means inflation will fall below the 2 per cent Bank of England target one year ahead of schedule.
The GDP forecast also represents an uptick in the growth rate of 0.1 per cent for this year, and 0.5 per cent for next year when it is expected to reach 1.9 per cent.
The forecast growth rate for 2026 is 2.1 per cent.
Of that drop in inflation, around 0.2 per cent is accounted for by the extension in the freeze in fuel duty.
Previous models would have accounted for fuel duty rising, but this is not happening for at least another year.
Simon French, chief economist at Panmure Gordon described those forecasts as “punchy” and far higher than his, or the Bank of England’s own forecasts for the same period.
As part of his announcement, Hunt said he expects borrowing to fall to 1.2 per cent of GDP.
Paul Johnson, director of the Institute for Fiscal Studies said, on social media platform X: “Chancellor announces borrowing falling over next five years to just 1.2 per cent of GDP. Take this with a pinch of salt.
"This will depend on implementing extremely tight spending plans which will imply cuts for many public services.”
david.thorpe@ft.com
