OECD Slashes UK Growth Forecast, Warns of Inflation Risks

The Organisation for Economic Co-operation and Development (OECD) has downgraded its forecast for UK economic growth in 2027, citing higher energy prices, interest rates, and global uncertainty. The organization now expects the economy to expand by just 1% next year, down from a previous forecast of 1.1%. This revision comes as Prime Minister Andy Burnham visits New York to promote the United Kingdom as a destination for international business and investment.

The OECD also predicts that the Bank of England will cut interest rates next year, with Bank Rate expected to fall from 3.75% to 3.5%. Inflation is still a concern, with the OECD forecasting that UK inflation will average 2.6% in 2027, above the Bank of England's 2% target.

The combination of sluggish growth and stubborn inflation poses a challenge for the Bank of England as it navigates its monetary policy response. The OECD has warned that central banks must act if price pressures sharpen, and governments need to contain spending and improve public sector efficiency to mitigate the impact of rising borrowing costs.