According to BNP Paribas, quarterly momentum will drop to roughly 0.1% and UK economic growth would slow to 0.7% in 2026 from 1.4% in 2025. It is anticipated that inflation would reach 3.4% before only slightly declining, remaining above the BoE objective. While 10-year gilt yields remain high until dropping to 4.30% in 2027, monetary policy is predicted to tighten by 50 basis points in 2026.
Gild yield growth slowness and delayed relief
"After a predicted +0.4% q/q in Q1, the average quarterly pace would decline to roughly +0.1%; economic activity is likely to slow down in 2026, with growth limited to 0.7% after 1.4% in 2025."
"This slowdown would occur against a backdrop of increasing inflationary pressures induced by the conflict in Iran: inflation would hit 3.4% y/y before dropping very gradually to 3.23% y/y in 2027, still substantially above BoE's objective."
"In this environment, monetary policy would turn toward a tightening of 50 basis points in 2026, in contrast to the earlier planned easing scenario."
"On lower net supply, a drop in political risk premia, and a market beginning to foresee BoE rate cuts, 10y gilt rates will remain elevated in 2026 before falling to 4.30% in 2027."
"We expect the yen and GBP to stabilize versus the dollar in 2026 (USD/JPY 160 and GBP/USD 1.35 by Q4 2026) and 2027."
Gild yield growth slowness and delayed relief
"After a predicted +0.4% q/q in Q1, the average quarterly pace would decline to roughly +0.1%; economic activity is likely to slow down in 2026, with growth limited to 0.7% after 1.4% in 2025."
"This slowdown would occur against a backdrop of increasing inflationary pressures induced by the conflict in Iran: inflation would hit 3.4% y/y before dropping very gradually to 3.23% y/y in 2027, still substantially above BoE's objective."
"In this environment, monetary policy would turn toward a tightening of 50 basis points in 2026, in contrast to the earlier planned easing scenario."
"On lower net supply, a drop in political risk premia, and a market beginning to foresee BoE rate cuts, 10y gilt rates will remain elevated in 2026 before falling to 4.30% in 2027."
"We expect the yen and GBP to stabilize versus the dollar in 2026 (USD/JPY 160 and GBP/USD 1.35 by Q4 2026) and 2027."
