Why is Deutsche Bank raising its UK inflation forecast for 2027?

Deutsche Bank has raised its 2027 UK inflation forecast, projecting an average CPI of 3.7% for the year, up from the previously forecasted 3.2%. Chief U.K. Economist Sanjay Raja attributes this upward revision to rising energy prices, firming food costs, and indirect pass-through effects. Energy prices, particularly diesel pump prices, are expected to increase by 5.35% month-over-month, contributing to an annual CPI rate of 17.80% and a 23% rise in heating oil prices.

Food prices, while still low, are also expected to rise, with processed food prices increasing by 0.1% month-over-month and unprocessed food prices up by 0.2%, driven by meat prices. Services prices are projected to see a slight decline, but the annual rate is still expected to be 3.71%.

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