Autumn Statement 23: GDP forecasts 'slashed' as inflation expectations climb
Inflation is expected to average 4.8% in the final quarter of this year, 1.9 percentage points higher than in the March forecast.
Michael Field, European market strategist at Morningstar, said today had brought «little in the way of good news» from a macroeconomic perspective, describing rising inflation forecasts and «slashed» GDP predictions as «a double-whammy of negativity».
Inflation is expected to average 4.8% in the final quarter of this year, 1.9 percentage points higher than predicted in the March forecast.
Autumn Statement 23: UK growth forecasts face significant downgrade
Throughout 2023, it is now expected to average 7.5%, up from 6.1% in March, and is predicted to average 2.1% between 2024 and 2028, up from 0.8% in March.
Therefore, prices are expected to be 7% higher by the start of 2028 than previously expected in March.
It will then fall to the Bank of England's 2% target in the second quarter of 2025, about a year later than had been previously predicted.
«As well as being more persistent, we now expect inflation to be more domestically generated than in our March 2023 forecast, rather than being driven largely by external factors,» the OBR said.
While the OBR has typically been «far more optimistic» than the Bank of England in past budgets and fiscal events, today's forecasts came more in line with the central bank, noted Lindsay James, investment strategist at Quilter Investors.
With its new GDP forecasts, the OBR revised down its estimate of the medium-term potential growth rate of the economy from 1.8% in March to 1.6%.
Autumn Statement 23: Chancellor Hunt promises 110 measures to grow UK economy
This has pushed cumulative real growth between 2023 and 2027 2.4 percentage points lower than the
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