Deutsche Bank’s Sanjay Raja says the UK economy is tracking close to the Bank of England’s Scenario A, with stronger‑than‑expected early‑2026 GDP but a cooling labour market and easing price pressures. GDP is seen around 1% in 2026–27, while CPI is projected slightly below Scenario A and potentially under the 2% target at longer horizons.
Scenario A path for growth and CPI
“The economy – at least on the surface – has been stronger than the Bank assumed. GDP growth, to start the year, was stronger than the Bank anticipated. But the labour market has softened a touch, relative to the Bank’s expectations.”
“Relative to the MPC’s scenarios, we see GDP growth tracking closer to Scenario A, with output a little more resilient on the back of stronger catch up in Q1-26. Q2-26 GDP growth looks poised to push closer to 0.1-0.2% q-o-q. And annual GDP growth this year looks set to be at the BoE staff projection of 0.9%, with growth likely to push upwards of 1%.”
“Based on current market conditions, GDP growth is expected to push a little past all three Bank scenario projections this year. Incorporating the stronger Q1-26, we would expect Bank projections, under current market conditions, to have increased to 1% (Scenario A: 0.8%). GDP growth in year 2 (2027), we expect, would also stay steady at 1% – broadly consistent with the Bank’s Scenario A & B.”
“On inflation, based on current market conditions, we would expect CPI to remain slightly below the Bank’s Scenario A projections. If we applied the same conditioning assumptions to Scenario B, headline CPI would likely sit 0.1pp to 0.15pp below the Bank’s projections at both the two-year and three-year forecast horizons – pushing headline CPI below the Bank’s 2% target.”
“Based on current market pricing and recent outturns, the UK economic trajectory remains closest to the Bank’s Scenario A.”
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