We expect GDP growth to average around 1% annualised over the next four quarters as household spending, investment and exports all remain subdued, while the latest budget won’t provide much short-term stimulus. However, the labour market outlook has improved, and we expect the unemployment rate to trend downwards next year.
Core inflation is likely to remain above target before gradually heading back to 2% by the middle of 2026. We now expect the Bank to remain on hold next year, with inflation falling convincingly enough to not require any policy tightening.
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