Compared with the November edition, the BoE's new Monetary Policy Report (MPR) shows both higher inflation and growth over the medium-term and a slightly tighter labour market. The new projections are based on market prices that see Bank Rate falling to 3.9 percent in the first quarter of next year, 3.3 percent in 2026 and 3.2 percent in 2027. These levels are slightly lower than expected last time.

CPI inflation is projected to fall temporarily to the 2 percent target next quarter before increasing again in the following two quarters. This profile is attributable to developments in the direct energy price contribution which becomes less negative. Inflation is seen around 2¾ percent by the end of this year and it remains above target over nearly all of the remainder of the forecast period. This reflects the persistence of domestic inflationary pressures, despite an increasing degree of slack in the economy. The headline rate is projected to be 2.3 percent in two years' time and 1.9 percent in three years. Risks from domestic price and wage pressures are now thought to be more evenly balanced but some upside risks apply from geopolitical factors over the first half of the forecast period.

In terms of growth, GDP growth is expected to pick up gradually during the forecast period, in large part due to a waning drag from past increases in Bank Rate. Excess demand is judged to have diminished significantly over recent quarters and potential supply growth is expected to remain relatively subdued by historical standards. Even so, the continuing relative weakness of demand points to a margin of economic slack emerging during the first half of the forecast period. Unemployment is expected to rise somewhat further, peaking at 4.9 percent at the start of 2026.

Formerly called the Quarterly Inflation Report, the Monetary Policy Report (MPR) is produced by the Bank of England (BoE) every February, May, August and November. The publication updates the central bank's assessment of recent economic developments at home and abroad and sets out the latest official forecasts for growth and inflation. As such, it provides the economic underpinnings for any change in monetary policy made by the Bank's Monetary Policy Committee (MPC). The MPR is released at the same time as the BoE makes its policy announcement

For analysts who want to know the Monetary Policy Committee's latest thinking on the economy, the MPR provides an in-depth guide. As such it offers key information on economic trends and, in particular, areas where the Bank is primarily focused. The MPR is discussed at a press conference held by the BoE governor shortly after its release.