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Macro EconomyMedium•11 November 2026•
4 min read

NIESR Sees UK Inflation at 4.4% in December, Above Target Through 2030

Key Facts

1NIESR forecast inflation of 4.4% in December 2026 and 5.4% in January 2027.
2The Bank of England raised rates by 0.25 percentage points to 4%, by a vote of 8–1.
3NIESR expects inflation to remain above the 2% target until late 2030.
4The Office for National Statistics set the release of its third-quarter GDP estimate for 12 November 2026 at 7:00 a.m.

The National Institute of Economic and Social Research (NIESR) expects UK consumer price inflation to reach 4.4% in December 2026 before jumping to 5.4% in January 2027, according to forecasts it published in October. The path was part of NIESR’s autumn 2026 outlook, presented at a press conference on 10 November. In its central forecast, the institute projected inflation would peak at 4.4% in February 2027, compared with its previous estimate of 3.8% in July. NIESR expects inflation to remain above the Bank of England’s 2% target in 2027, 2028 and 2029, and not return to target until late 2030. The projected path prolongs pressure on the central bank as the effects of higher energy prices persist and may feed through to wages and other prices.

The forecasts set out a rising path for inflation in the coming months: NIESR’s median model estimate for the annual rate was 3.7% in September 2026 and 4.1% in November, before reaching 4.4% in December. The model then projects a sharp increase to 5.4% in January 2027. The move from 4.4% in December to 5.4% in January reflects the widening impact of the energy shock on the price reading, ahead of the peak the institute expects in February. The outlook comes as the Office for Budget Responsibility reported that inflation was 3.1% in the third quarter of 2026, one percentage point above its March forecast. The watchdog attributed most of the forecast overshoot to utility and fuel prices.

The risks surrounding the price outlook are linked to higher energy costs, according to an Associated Press report on the Bank of England’s decision. Governor Andrew Bailey said, "There are now sufficient inflationary pressures building as a result of higher energy prices to justify an increase in interest rates." The report linked the fuel shock to the war in Iran and supply bottlenecks through the Strait of Hormuz. The pass-through of energy costs to wages and prices matters because it could extend the period inflation remains above target even after the initial rise in fuel costs subsides. Inflation stood at 3.5% in September, its highest level in 11 months and above the bank’s 2% target, reinforcing market expectations of a rate increase in November and the possibility of further increases in 2027.

At a meeting that ended on 4 November, the Bank of England raised its key interest rate by 0.25 percentage points to 4%, by a vote of 8 to 1. The dissenting member voted for a larger increase of 0.5 percentage points, to 4.25%. Bank staff forecasts published in November showed inflation could reach about 4.5% in the first quarter of 2027, then about 5% in the second quarter. The first-quarter estimate was about 1.25 percentage points above the July report’s forecast, while the second-quarter estimate exceeds the bank’s 2% target by a wide margin. The estimates show that the bank’s near-term outlook also includes a rise in inflation during the first half of 2027, as it tightens monetary policy.

NIESR’s outlook differs from that of the Office for Budget Responsibility, which forecast in October a quarterly inflation peak of 3.8% in early 2027, followed by a return to the Bank of England’s target in mid-2028. The gap points to a significant difference in how long inflation is expected to remain above target: the watchdog’s path is shorter than NIESR’s forecast, which keeps inflation above 2% until late 2030. The Office for Budget Responsibility had said inflation in the third quarter was one percentage point above its March forecast, attributing this mainly to utilities and fuel. NIESR’s forecasts put the peak higher, in February 2027, and link the prolonged pressure to the energy shock and its subsequent effects. The difference between the paths makes the timing of inflation’s return to target a key focus in assessing the monetary policy outlook.

Investors are awaiting the first estimate of UK gross domestic product for the third quarter, covering July to September 2026, due on 12 November at 7:00 a.m., according to the confirmed schedule from the Office for National Statistics. The office’s latest published update showed real GDP grew 0.7% in the three months to August, with services output up 0.9% and production output down 0.2%. The figures provide context for the new estimate amid higher interest rates and the expected inflation path. After the GDP release, NIESR’s schedule calls for its wage tracker on 17 November and inflation tracker on 18 November. The releases follow the autumn outlook presented on 10 November, adding updates on activity, wages and prices during the month.