On July 30, the Bank of England's baseline forecast showed that as the energy price shock gradually transmits to the broader economy, the UK's annual inflation rate will remain above the 2% inflation target until the fourth quarter of 2027. In a more moderate scenario, the Bank of England expects inflation to fall below the 2% target in the third quarter of next year. However, in a more adverse scenario, the Bank of England's model indicates that inflation could rise above 4% early next year and stay above 2% until 2029. The latest UK data shows that last month, the annual inflation rate fell to 2.6%, a larger decline than market expectations.