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
