Chancellor Rachel Reeves asserted her economic strategy is effective despite a revised growth forecast for the UK in 2026. The Office for Budget Responsibility (OBR), the government’s official forecaster, reduced its growth projection for the year to 1.1% from 1.4%, while raising estimates for future years. Reeves presented these figures during her Spring Statement, noting the OBR now anticipates lower inflation than previously expected. The updated forecasts were made before the Middle East conflict erupted, with the OBR warning that such an event could significantly impact global and UK economies. Reeves emphasized the government’s commitment to safeguarding the economy against external shocks and protecting households from international instability. Recent strikes between Israel, the US, and Iran have already driven up oil and gas prices, raising concerns about potential inflation spikes if energy costs remain elevated. The OBR’s latest projections indicate inflation will drop to 2.3% by year-end, down from 2.5% in November, and reach the Bank of England’s target of 2% by 2026. However, the recent surge in energy prices has sparked questions about whether inflation could rebound if costs stay high, potentially limiting further interest rate cuts by the Bank of England. Economists and business leaders offered mixed reactions. Paul Dales of Capital Economics noted the revised growth forecast provides more fiscal flexibility for the autumn Budget but cautioned that Middle East tensions could offset these gains. Shevaun Haviland of the British Chambers of Commerce acknowledged the economy is moving in the right direction but stressed the need for faster growth, as GDP is expected to remain below 2% annually until 2030.#middle_east_conflict #office_for_budget_responsibility #bank_of_english #chancellor_rachel_reeves #spring_statement
Reeves says her plan is working as growth forecast cut for this year Chancellor Rachel Reeves asserted that her economic strategy is yielding results despite a revised downward projection for the UK’s growth this year. The government’s official economic forecast body, the Office for Budget Responsibility (OBR), adjusted its 2026 growth estimate to 1.1% from the 1.4% predicted in last year’s Budget. The OBR also revised upward its long-term growth projections, though the immediate outlook remains cautious. Reeves highlighted the OBR’s updated inflation forecast, which now anticipates a lower rate for 2026 than previously expected. The revised forecasts were made before the recent escalation of conflict in the Middle East, which the OBR warned could have a “very significant” impact on global and UK economic conditions. Reeves emphasized the government’s commitment to stabilizing the economy, stating it is the state’s responsibility to “secure our economy against shocks and protect families from the turbulence that we see beyond our borders.” The conflict has already triggered sharp increases in oil and gas prices, raising concerns about potential inflationary pressures. The OBR now predicts inflation will decline to 2.3% this year, down from 2.5% in November, before reaching the Bank of England’s target of 2% by the end of 2026. However, sustained high energy costs could disrupt this trajectory, potentially limiting the Bank of England’s ability to cut interest rates. Economists noted that the OBR’s revised forecasts offer some flexibility for the government. Paul Dales of Capital Economics suggested the “headroom” in the budget could provide additional resources for the autumn Budget, though he warned that Middle East developments could offset these gains.#rachel_reeves #middle_east_conflict #office_for_budget_responsibility #bank_of_english #capital_economics
