OECD Forecasts UK to Lead G7 in Inflation, Warns of Global Trade Risks
London - The Organisation for Economic Co-operation and Growth (OECD) has forecast that the United Kingdom will experience the highest inflation rate within the G7 nations this year. The latest OECD economic outlook projects UK inflation will reach 4% before declining, substantially exceeding the Bank of England’s 2% target.
The report identifies rising food prices as a contributing factor to the UK’s inflationary pressures, noting the UK is among several countries facing increased food costs. Domestically,the OECD points to increased costs for UK companies stemming from rises in employers’ National Insurance Contributions and the minimum wage,costs which analysts say have been passed on to consumers.
Last week,the Bank of England maintained its interest rates unchanged while cautioning that the UK was not “out of the woods yet” regarding inflation.
Globally, the OECD raised its 2025 growth forecast to 3.2%, up from 2.9% in June, citing resilience in the first half of the year and “front loading” of activity ahead of new US tariffs. the US growth forecast was also increased to 1.8% from 1.6%, driven by investment in technology, including artificial intelligence (AI).
However, the OECD warns of a slowdown in the second half of the year as the impact of escalating tariffs takes hold. US tariff rates have risen to 19.5% as may – the highest level since 1933 – impacting trade with almost all countries.
OECD chief economist Alvaro Pereira emphasized the importance of lowering trade barriers,stating,”It’s important to remember that hundreds of millions of people came out of poverty because of trade growth,and also we know that open markets are usually good for buisness and good for technological development.”
While former President Trump argues tariffs will bolster US manufacturing and jobs, the OECD notes the full impact is still unfolding, becoming ”increasingly visible in spending choices, labor markets and consumer prices.”
