THE UK will have one of the highest inflation rates of any major developed economy this year, the Organisation for Economic Co-Operation and Development (OECD) has said.
Although the Paris-based OECD said the UK should narrowly avoid recession, it said inflation in the UK will be higher in 2023 than nearly any of its other members apart from Argentina and Turkey.
Like the International Monetary Fund, the OECD has upgraded its forecast for UK economic growth, although it warned that higher interest rates are likely to dampen the prospect of growth over the coming months.
It comes after Jeremy Hunt told Sky News he would back the Bank of England raising interest rates to bring inflation under control, even if it meant pushing the UK into a recession.
BREAKING: Britain will have the highest inflation of any major developed economy this year but should narrowly avoid recession, the Organisation for Economic Co-operation and Development (OECD) has said in its latest set of forecasts. 👉 https://t.co/iTd3H7OEYe 📺 Sky 501 pic.twitter.com/b0TScTDBAr
— Sky News (@SkyNews) June 7, 2023
The OECD said: “The high interest burden on public debt and the recent drop in average debt maturity leave the public finances exposed to movements in bond yields.
“Renewed increases in wholesale energy prices due to Russia’s war of aggression against Ukraine would further squeeze real incomes given the United Kingdom’s high dependence on natural gas.
“Faster-than-expected resolution of uncertainty regarding future trade relationships is an upside risk.”
The OECD explained that the UK”s inflation rate should average 6.9% this year, higher than the OECD average and nearly every other country in the developed world.
Clare Lombardelli, the OECD’s new chief economist, said: “The global economy is turning a corner but faces a long road ahead to attain strong and sustainable growth.
“Monetary policymakers need to navigate a difficult road. Although headline inflation is declining thanks to lower energy prices, core inflation remains stubbornly high, more so than previously expected.
“Some economies grappling with stubbornly high core inflation may require additional interest rate increases.”
Responding to the forecast, Hunt said: “Today’s report boosts our growth forecast, praises our action to help parents back to work with a major expansion of free childcare, and recognises our cuts to business taxes which aim to drive investment.
“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.”
