Oxford Economics warn UK inflation could reach four per cent

Economists from Pantheon Macroeconomics and Deutsche Bank believe the Consumer Prices Index (CPI) remained at three per cent last month.

However, experts at Oxford Economics say rising energy prices, driven by conflict in the Middle East, could push inflation above four per cent during the second half of 2026.

Edward Allenby, senior economist at Oxford Economics, said: “Under our updated assumptions, we now anticipate a much sharper rise in petrol prices, while higher wholesale gas prices cause a 19 per cent increase in the Ofgem energy price cap in July.”

We now expect CPI inflation to exceed four per cent during the second half of 2026.

Mr Allenby predicts CPI inflation actually fell in February to 2.8 per cent, due to lower petrol prices and slowing services inflation.

But he said this trend could soon reverse if energy costs continue rising.

Deutsche Bank’s chief UK economist Sanjay Raja said: “We expect the UK’s disinflation story will take another twist on its (eventual) way down to target.”

The Bank of England recently warned that higher wholesale energy prices could delay the UK’s return to target inflation.

The central bank now forecasts inflation to remain around three per cent in the second quarter of 2026, up from a previous estimate of 2.1 per cent.