OBR: UK Won't Hit 2% Inflation Target Until 2025

The latest figures come as the Bank of England's own governor argues markets are underestimating the threat of inflation to the UK economy

Ollie Smith 22 November, 2023 | 1:07PM
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Jeremy Hunt

Headline UK inflation will fall to 2.8% by the end of 2024 before falling to the Bank of England's (BoE) 2% target in 2025, chancellor Jeremy Hunt told the House of Commons in the Autumn Statement this afternoon – a dramatic delay to the Office for Budget Responsibility's (OBR) original expectations. 

"After a global pandemic and energy crisis, we have taken difficult decisions to put our economy back on track," the chancellor said.

"Our plan for the British economy is working, but the work is not done."

In addition, Hunt highlighted the OBR's gross domestic product (GDP) growth projections, which are also revised down.

Having forecast a contraction of -1.4% in 2023 – a recession – the OBR now predicts the UK economy will grow, overall, by 0.6% this year, and 0.7% in 2024. It had originally predicted 2024 growth would be 1.8%.

Inflation Dislocation

The UK government was recently handed more optimistic inflation figures. Prices are still rising, but last week the Office for National Statistics (ONS) said inflation had dropped to 4.6% in October, down from 6.7% in September.

Earlier this year, Rishi Sunak had promised to halve the headline rate of inflation by the end of 2023, a pledge last week's figures helped the government achieved.

However, giving evidence to MPs yesterday, BoE governor Andrew Bailey suggested the threat of inflation to the UK economy was still being underestimated.

Speaking to the Treasury Select Committee, Bailey said the bank's staff were more concerned about persistent inflation than markets appeared to be.

"I really think the market is putting too much weight on the current data releases and the fact that we've seen inflation come down quite rapidly – that's good news obviously,” he commented.

"We are concerned about the potential persistence of inflation as we go through the remainder of the journey down to 2%, and I think the market is underestimating that."


On the debt to GDP ratio, Hunt said the UK's headline debt-to-GDP level would fall to 92.8% in the next five years, based on OBR projections.

According to the Office, underlying debt will be 91.6% of GDP in 2024, 92.7% in 2024/25, 93.2% in 2026/27, before declining to 92.8% in 2028/29.

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Ollie Smith

Ollie Smith  is editor of Morningstar UK

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