UK GDP expanded by a relatively strong 0.7% in the three months to April 2026, according to the ONS, but it fell by 0.1% month on month (although the margin of error in estimating GDP is 0.2 percentage points so April’s GDP should be taken as flat rather than a fall). CPI inflation surprised on the upside, remaining at 2.8% in both April and May despite the expected impact of oil and energy price rises due to the conflict.

However, the greatest impacts on broader economy-wide inflation are expected to be seen in 2026 H1 and 2027 Q1. Financial markets and economic forecasters now assume there will be between 0 and 1 rate rise by the Bank of England this year, down from between 1 and 2 in the CPA’s Spring forecasts, but this may be revised as CPI inflation rises in H2 in response to the conflict.

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