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The latest forecast by the Organization for Economic Co-operation and Development (OECD) predicts that the UK will experience the highest rate of inflation among the G7 advanced economies in 2025. The projected inflation rate for the UK is 3.5% for the year, with an increase attributed to higher food costs. Despite a slight increase in the forecast for UK growth to 1.4% for this year, there are expectations for a slowdown in the economy in the following year.
Chancellor Rachel Reeves is gearing up for November’s Budget, where she is anticipated to make adjustments to taxes or spending to adhere to government borrowing regulations. The OECD’s revised inflation forecast for the UK in 2025 is 3.5%, up from its previous estimate, and while predictions indicate a decline to 2.7% in 2026, this figure would still rank as the second highest among the G7 nations. Economic growth in the UK is set to decelerate to 1% next year, influenced by a tighter fiscal stance, trade expenses, and uncertainty.
Reeves responded to the forecast by acknowledging the strength of the British economy in comparison to earlier estimations, emphasizing the need to foster an economy that benefits and rewards working individuals. Shadow chancellor Sir Mel Stride, on the other hand, criticized Labour’s economic handling, claiming that the UK is facing a scenario of high taxation, elevated inflation, and minimal growth. The current rate of inflation in the UK stands significantly above the Bank of England’s target of 2%.
The OECD has also raised its outlook for global economic growth in 2025, indicating a higher resilience than previously anticipated in the first half of the year. This growth projection has been supported by increased activity as companies expedited deals prior to the introduction of new US tariffs. The US economy has witnessed growth in tech investments such as artificial intelligence (AI), leading to an upward revision of the growth forecast for the country for this year. Nonetheless, the OECD warns of a noticeable softening of growth in the latter half of the year due to the impact of escalating tariffs
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