UK inflation to be highest among big economies in 2023 – OECD

LONDON  – Britain remains on course to have the highest inflation of leading rich economies in 2023, according to Organization for Economic Cooperation and Development forecasts which showed the country’s inflation problem widening compared with most of its peers.

Britain’s headline inflation rate was set to average 7.2 percent over 2023, up from a previous forecast of 6.9 percent made by the OECD in June.

The fresh estimate represented the biggest upwards revision for any Group of Seven economy – apart from Japan – in the latest set of projections by the Paris-based think tank published on Tuesday.

It was also higher than Germany’s expected inflation this year of 6.1 percent and France’s 5.8 percent, both of which represented cuts from the OECD’s June forecasts.

READ: UK inflation pressure stays strong despite fall in headline rate

Prime Minister Rishi Sunak has promised to halve inflation by the end of this year before an expected election in 2024, meaning it would need to fall from about 7 percent now to around 5 percent in December compared with the same month last year.

The OECD’s updated projections – which suggested hitting that target will be a close-run thing – showed British inflation was set to slow to 2.9 percent in 2024, the same as France and slightly lower than Germany’s 3 percent.

“Today the OECD have set out a challenging global picture, but it is good news that they expect UK inflation to drop below 3 percent next year,” finance minister Jeremy Hunt said in a statement.

READ: Bank of England raises borrowing costs to 15-year peak, signals rates to stay high

Britain’s high inflation rate has led the Bank of England to raise borrowing costs 14 times in a row since December 2021. It is expected to increase Bank Rate again to 5.5 percent from 5.25 percent on Thursday although economists and investors think that could prove to be the last hike of the BoE’s attempts to smother inflation risks in an economy that is showing signs of slowing.

The OECD said it expected Britain’s economy to grow by 0.3 percent in 2023, unchanged from its June forecast and the second-weakest performance among rich economies after Germany, before expanding by 0.8 percent in 2024, the joint weakest along with Italy.