UK inflation will not return to the Bank of England’s 2% target until late 2030, a year later than previously forecast, according to the National Institute of Economic and Social Research. NIESR sees inflation peaking at 4.4% in February 2027, up from its earlier 3.8% forecast, and remaining above target through 2029 because of second-round wage effects linked to the Iran war. The think-tank raised its 2026 growth forecast to 1.6% from 1.1%, citing stronger government spending and business investment, partly driven by AI (artificial intelligence), but expects growth to slow to 1.1% in 2027 and 0.9% in 2028. It projects unemployment rising from 4.8% in 2026 to a 5.1% peak in 2031, while wage growth averages 3.9% over the next three years. NIESR expects the Bank of England to raise rates once, in February, despite investors pricing in two or three quarter-point increases by the end of next year. It said rates may need to reach about 5% to bring inflation back to target in the medium term. The Bank raised its policy rate to 4% from 3.75% last week, its first increase in more than three years.