UK Disinflation Advances, but Momentum Remains Elusive

Against a backdrop of easing inflation, this NatWest economics note assesses whether the UK economy is stabilising or merely pausing before its next turn.

• The Bank of England held Bank Rate at 3.75% in another narrow vote, with softer inflation, easing wage growth, and rising unemployment opening the door to a near-term cut.

• Growth signals are mixed: PMIs and housing prices have improved, but labour demand remains weak and GDP growth for 2026 is revised down to 0.9%.

• Business sentiment is cautious rather than pessimistic, reflecting softer demand, tighter trade conditions, and lingering uncertainty.

Is the UK nearing a policy inflection point—or just marking time? The full report unpacks the trade-offs facing policymakers and markets.