[UK] OECD forecasts show highest inflation in G7

OECD forecasts show the UK being hit by the highest inflation in the G7 this year, as the nation deals with the impact of higher payroll taxes, an increase in the minimum wage and rises in regulated prices, Financial Times reports.

Consumer prices are set to rise 3.5 per cent in 2025, up from 2.5 per cent last year, and will remain well above the Bank of England’s 2 per cent target in 2026, the OECD said on September 23. 

In addition, it reportedly predicted UK growth of 1.4 per cent this year, up from 1.1 per cent last year, the second-fastest after the US among G7 countries. However, 2026’s 1 per cent pace will leave the UK behind the US, Canada and Germany. 

The OECD’s forecast was released at a time when Chancellor Rachel Reeves is widely expected to raise taxes further in the autumn Budget after disappointing productivity data and a deterioration in the public finances. 

The Chancellor reportedly needs to plug a fiscal hole that some economists have estimated at more than £20bn to maintain her key fiscal rule: funding day-to-day spending entirely through tax revenues by 2029-30. 

According to reporting from the FT, Ms Reeves welcomed the OECD’s growth forecasts, saying, “I know there is more to do to build an economy that works for working people and rewards working people.” 

The OECD’s inflation forecast showed that the UK’s forecast rate of 3.5 per cent is the highest of the G7 group of advanced economies. Greater than the rate of 3.1 per cent in Japan, 2.7 per cent in the US, 2.2 per cent in Germany, 2 per cent in Canada, 1.9 per cent in Italy and 1.1 per cent in France.  

These forecasts reportedly sit broadly in line with economists’ expectations for 3.4 per cent in 2025 and 2.6 per cent in 2026, according to figures compiled by Consensus Economics, averaging the figures of leading private forecasters.

Source: Financial Times

OECD forecasts show the UK being hit by the highest inflation in the G7 this year, as the nation deals with the impact of higher payroll taxes, an increase in the minimum wage and rises in regulated prices, Financial Times reports.

Consumer prices are set to rise 3.5 per cent in 2025, up from 2.5 per cent last year, and will remain well above the Bank of England’s 2 per cent target in 2026, the OECD said on September 23. 

In addition, it reportedly predicted UK growth of 1.4 per cent this year, up from 1.1 per cent last year, the second-fastest after the US among G7 countries. However, 2026’s 1 per cent pace will leave the UK behind the US, Canada and Germany. 

The OECD’s forecast was released at a time when Chancellor Rachel Reeves is widely expected to raise taxes further in the autumn Budget after disappointing productivity data and a deterioration in the public finances. 

The Chancellor reportedly needs to plug a fiscal hole that some economists have estimated at more than £20bn to maintain her key fiscal rule: funding day-to-day spending entirely through tax revenues by 2029-30. 

According to reporting from the FT, Ms Reeves welcomed the OECD’s growth forecasts, saying, “I know there is more to do to build an economy that works for working people and rewards working people.” 

The OECD’s inflation forecast showed that the UK’s forecast rate of 3.5 per cent is the highest of the G7 group of advanced economies. Greater than the rate of 3.1 per cent in Japan, 2.7 per cent in the US, 2.2 per cent in Germany, 2 per cent in Canada, 1.9 per cent in Italy and 1.1 per cent in France.  

These forecasts reportedly sit broadly in line with economists’ expectations for 3.4 per cent in 2025 and 2.6 per cent in 2026, according to figures compiled by Consensus Economics, averaging the figures of leading private forecasters.

Source: Financial Times