Persistent inflation to surpass 3% benchmark throughout 2025, persisting into the year 2026.

In a recent study on Macro-Economic Modelling and Forecasting, Professor Huw Dixon, an author of the article, has outlined four scenarios for the UK's inflation rate over the coming months. The forecast assumes that geopolitical tensions do not deteriorate, but events in Ukraine and the Middle East remain uncertain.

The most positive of these scenarios, the low scenario, predicts an annual inflation rate of 1% for the next 12 months. This equates to a monthly inflation rate of 0.08%. However, even with this optimistic outlook, inflation remains above 2% over the same period.

The medium scenario, which appears to be the most likely, assumes an annual inflation rate of 2%. This translates to a monthly inflation rate of 0.17%. Under this scenario, inflation is expected to remain above 3% for the next 12 months.

The high scenario, while still within the "high to Medium" range, assumes an annual inflation rate of 3%. This equates to a monthly inflation rate of 0.25%. Similarly, the very high scenario assumes an annual inflation rate of 5%, or 0.4% per calendar month.

It is important to note that the Israeli-Iran conflict could result in a significant supply side shock to inflation in the coming months if Iranian allies such as Russia and China become involved. This could potentially push the inflation rate higher than the current projections.

In addition to the headline inflation rate, the study also examined core inflation (CPI excluding food and energy). Core inflation fell from 3.8% to 3.5% in the recent months. Services inflation, which has been a significant contributor to overall inflation, fell steeply from 5.4% to 4.7%. Goods price inflation, on the other hand, increased from 1.7% to 2.0%.

The combined decrease led to a fall in the headline inflation rate of 0.1 percentage points. Annual CPI inflation in the UK fell slightly from 3.5% in April to 3.4% in May 2025. The inflation rate from April to May 2025 was 0.2%.

It is worth mentioning that there was an error in the April inflation rate, which should have been 3.4% instead of 3.5%. Despite this error, the overall trends in the data remain consistent with the projections outlined in the study.

Professor Huw Dixon held a position at the University of Leicester in the year 2025; however, the specific institution or title he held there in 2025 is not explicitly stated in the available search results.

In conclusion, the UK's inflation rate is expected to remain above 2% for the next 12 months, with the medium scenario being the most likely. However, geopolitical events, particularly the Israeli-Iran conflict, could potentially push the inflation rate higher. It is crucial for policymakers to closely monitor these developments and adjust their strategies accordingly.

Persistent inflation to surpass 3% benchmark throughout 2025, persisting into the year 2026.