tradingkey.logo
tradingkey.logo
Search

GBP: Higher inflation keeps BoE on tightening path – BNP Paribas

FXStreetMay 4, 2026 2:00 PM
facebooktwitterlinkedin
View all comments0

BNP Paribas economists expect United Kingdom (UK) growth to slow to 0.7% in 2026 from 1.4% in 2025, with quarterly expansion dropping to about 0.1%. Inflation is projected to rise to 3.6% year-on-year before easing only gradually, prompting a 50 bps monetary tightening in 2026, while 10-year gilt yields stay elevated before falling to 4.30% in 2027.

UK outlook constrained by inflation

"Economic activity is expected to slow down in 2026, with growth limited to 0.7% after 1.4% in 2025; following a forecasted +0.4% q/q in Q1, the average quarterly pace would fall to around +0.1%."

"This slowdown would occur against a backdrop of renewed inflationary pressures triggered by the war in Iran: inflation would reach 3.6% y/y before easing only gradually to 3.3% y/y in 2027, remaining well above BoE's target."

"In this context, and contrary to the initially envisaged easing scenario, monetary policy would shift toward a tightening of 50 basis points in 2026."

"10y gilt yields will remain elevated in 2026, before falling to 4.30% in 2027 on reduced net supply, a decline in political risk premia and a market starting to eye BoE rate cuts."

"We anticipate stabilisation of the yen and the GBP against the dollar in 2026 (USD/JPY 160 and GBP/USD 1.35 by Q4 2026) and 2027."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Disclaimer: The information provided on this website is for educational and informational purposes only and should not be considered financial or investment advice.

Comments (0)

Click the $ button, enter the symbol, and select to link a stock, ETF, or other ticker.

0/500
Commenting Guidelines
Loading...

Recommended Articles

tradingkey.logo
Risk Warning: Our Website and Mobile App provides only general information on certain investment products. Finsights does not provide, and the provision of such information must not be construed as Finsights providing, financial advice or recommendation for any investment product.
Investment products are subject to significant investment risks, including the possible loss of the principal amount invested and may not be suitable for everyone. Past performance of investment products is not indicative of their future performance.
Finsights may allow third party advertisers or affiliates to place or deliver advertisements on our Website or Mobile App or any part thereof and may be compensated by them based on your interaction with the advertisements.
© Copyright: FINSIGHTS MEDIA PTE. LTD. All Rights Reserved.