OECD Predicts Bank of England Rate Hold Until 2027 as Inflation Forecast Slows

The Bank of England may hold interest rates steady at 3.75% until well into 2027, according to the OECD's interim outlook for global growth and inflation. The Paris-based organisation projects that the UK's central bank can keep borrowing costs unchanged because current policy settings are tight enough to contain inflation.

The OECD cuts its 2026 UK inflation forecast to 3.1% from 3.7%, with further slowdown to 2.6% in 2027. This stance differs from the path expected for major central banks, including the US Federal Reserve and the European Central Bank, which are seen tightening policy further.

UK inflation remains above target at 3.1% in August, but the OECD expects price growth to slow down as energy prices recede in 2027. If oil and gas prices remain high, the Bank of England may need to keep policy unchanged instead.