The Bank of England now projects UK consumer price inflation will reach 3.2% in the final quarter of 2026, driven by higher energy costs and second-round effects — still above the 2% target but below an earlier risk scenario peak of 3.7%.
The 3.2% figure is the headline number from the Bank of England’s latest projections, as summarised by the Confederation of British Industry. The CBI posted the figures on social media, noting that the Q4 2026 projection compares with a higher peak of 3.7% in the Bank’s April “scenario B” — a risk pathway rather than a firm forecast, used to illustrate what could happen if upside pressures proved stronger than expected.
The Bank of England’s April 2026 Monetary Policy Report had already flagged CPI rising to around 3.3% in Q3 2026, with some further increase into Q4. The two main drivers cited are higher energy prices and what the Bank calls “moderate second-round effects” — the process by which an initial energy price shock feeds into wage growth and firms’ pricing decisions, potentially keeping inflation above target for longer. The shift from the 3.7% scenario B peak to a central projection of 3.2% suggests the Bank now judges some of those earlier upside risks to have eased, though the 3.7% figure comes via the CBI summary and is not directly verifiable in publicly available Bank of England headline tables.
Either way, 3.2% remains well above the Bank’s 2% target, set by HM Treasury for the Monetary Policy Committee. That gap matters for how long monetary policy stays restrictive — and restrictive policy means higher borrowing costs.
For Kent households, the practical pressure points are energy bills, petrol and food prices, which carry significant weight in the CPI basket. South East England has above-average household spending on transport and fuel compared with the national picture, according to ONS regional expenditure data, so energy-driven inflation tends to hit harder here than in some other parts of the country. Low-income households and those in poorly insulated homes face the sharpest squeeze on heating and electricity costs. If the Bank holds rates higher for longer to bring inflation back to target, Kent homeowners and buy-to-let landlords will also feel that through mortgage costs, with knock-on effects in the local rental market.
Local public finances aren’t insulated either. Kent County Council and district authorities including Medway Council run energy-intensive operations — public buildings, street lighting, transport fleets — and sustained above-target inflation adds pressure to budgets that are already stretched. Citizens advice bureaux, food banks and council hardship schemes across Kent may see continued demand if disposable incomes keep being eroded into late 2026.
The figures don’t yet signal the cost-of-living squeeze is over — but the gap between 3.2% and the earlier 3.7% risk scenario does suggest the worst-case path looks less likely than it did in April.
Source: @CBItweets