UK’s Spring Forecast: “my plan is the right one”

I n response to the Spring Forecast, Chancellor Rachel Reeves emphasized that her government's plan is the right one and “even more important” in a world that has become “yet more uncertain” facing increasing instability, particularly due to the Middle East crisis. The OBR's updated forecasts show GDP growth revised slightly down to 1.1% this year but revised upwards to 1.6% for both 2027 and 2028. Unemployment is projected to peak later this year and subsequently fall to 4.1% by the end of Parliament. Inflation is expected to decline faster than previously forecast, dropping by 1.1 percentage points this year to reach 2.3% from 3.4%. However, we believe geopolitical tensions and rising energy prices pose a risk of renewed inflationary pressures, suggesting that this drop may be less significant and temporary. Regarding the fiscal stance, headroom against the Chancellor's fiscal rules has increased, and debt is forecast to be lower than previously anticipated. Nevertheless, significant risks persist, particularly from the Middle East conflict. Should this conflict continue, potentially fuelling inflation while adversely affecting economic growth, the Bank of England may ultimately keep the Bank Rate unchanged this year, possibly even reducing or halting Quantitative Tightening .