The OECD, a club consisting of rich countries based in Paris, has unveiled its latest forecasts, revealing the highest inflation rate for Britain among G20 Nations, placing it just behind Argentina and Turkey
The United Kingdom is poised to reveal a headline inflation rate of 6.9%, which exceeds the 6.6% average for 2023 among advanced economies within the Organisation for Economic Co-operation and Development (OECD).
Despite being high, the UK’s inflation rate will be surpassed by several other countries within the broader membership, including Sweden and Iceland
Outlook for UK inflation and economic growth
However, according to the OECD, headline inflation in the UK is expected to decrease as a result of declining energy prices and approach the target level by the end of 2024. However, core inflation, driven by robust services inflation, is predicted to remain more persistent and recede only to 3.2% in 2024.
The United Kingdom is ultimately still expected to barely avoid entering a recession, despite this news.
The chancellor expressed support for the Bank of England to increase interest rates, even if it resulted in a recession, as a measure to control inflation. Following the International Monetary Fund, the OECD also revised its forecast for UK economic growth, no longer placing it as the slowest-growing among the G7 economies.
Concerns over highest inflation rate for Britain and public finances
The OECD’s Economic Outlook predicts that the UK will grow by 0.3% this year and 1% in 2024. The report raises concerns about the state of public finances due to the high-interest burden and vulnerability to bond yield movements.
It also mentions potential challenges from increased energy prices and highlights the upside risk of resolving trade uncertainties. The UK’s inflation rate is expected to average around 6.9%, slightly higher than the OECD average.
The OECD highlighted concerns about the UK’s inflation rate, as over a third of items in the consumer price index “basket” are experiencing an annual rise of over 5%, in contrast to the euro area, Japan, Canada, and the US, where the figure is under 30%.
Global growth below healthy rate, says OECD chief economist
Clare Lombardelli, the OECD’s newly appointed chief economist who previously served in the UK Treasury, stated that while global growth is projected to be slightly stronger than anticipated this year at 2.7%, it still falls below the threshold of what could be considered a healthy rate.
“But while inflation is still too high, we must stick relentlessly to our plan to halve it this year. That is the only long-term way to grow the economy and ease the cost of living pressures on families.”
