ING forecasts UK inflation peaking near 3%, below the 4% threshold that could trigger rate hikes, despite recent energy price rises.
The Bank of England is expected to keep interest rates unchanged at its 30 July meeting and maintain a prolonged hold through 2026, according to ING. Updated forecasts are likely to show inflation peaking around 3% later this year, well below the 4% level previously linked to sustained price pressures.
ING notes that oil prices would need to surge to $120 per barrel from the current $90, and Dutch TTF natural gas prices to rise to €80 per MWh from €58, to push inflation above 4%. Such a scenario could prompt modest tightening, but the base case remains a hold.
The bank’s projections suggest inflation will remain close to 3% in the second half of 2024 and early 2025, reducing the likelihood of rate hikes unless energy markets face further disruptions.