OECD: No Need for UK Interest Rate Hikes

The Organisation for Economic Co-operation and Development (OECD) has stated that the Bank of England does not need to increase interest rates, despite global economic growth slowing down. According to its interim economic outlook, worldwide growth is expected to slow to 2.9% this year from 3.4% in 2025.

The OECD's forecast for global economic growth is a slight improvement on its previous prediction of 2.8%. However, the body expects G20 headline inflation to rise to 4.1%, up 0.1 percentage point from last year's 3.4%. The UK GDP is still expected to slow, but by less than previously forecasted, from 1.3% in 2025 to 1.1%.

The OECD chief economist, Stefano Scarpetta, said the UK was 'starting from a different position' on monetary policy due to its already high interest rate of 3.75%. This contrasts with other major economies such as the US and Eurozone, where further policy rate increases are likely. The Bank of England last week left Bank Rate unchanged at 3.75%, but warned that borrowing costs would rise if inflation worsened.

Nigel Wilson, investor strategist at Saxo UK, agreed with the OECD's assessment, stating that 'the BoE can afford to leave its benchmark steady until well into 2027'. He criticized market expectations of four interest rate hikes by next year as 'mispriced' and overly hawkish.