The UK remains on track to have the highest inflation rate among major rich economies in 2023, according to forecasts by the Organization for Economic Co-operation and Development (OECD), which showed the country’s inflation problem is on the rise compared to most of its peers.
The UK’s overall inflation rate is expected to average 7.2% in 2023, up from the OECD’s previous forecast of 6.9% in June.
The new estimate represents the largest upward revision of any G7 economy – excluding Japan – in the Paris-based organisation’s latest set of forecasts, published on Tuesday.
The figure was also higher than inflation expected for this year in Germany, at 6.1%, and in France, at 5.8%, representing reductions compared to the OECD forecast in June.
Prime Minister Rishi Sunak has promised to halve inflation by the end of this year, before the election in 2024, meaning it will need to fall from around 7% currently to around 5% in December compared to the same month last year.
Updated OECD forecasts – which suggest reaching this target will be a difficult task – showed that inflation in Britain is expected to slow to 2.9% in 2024, the same as France and just below 3.0% in Germany.
Finance Minister Jeremy Hunt said in a statement: “The OECD today presented a challenging global picture, but it is good news that they expect UK inflation to fall below 3% next year.”
The UK’s high inflation rate has prompted the Bank of England to increase borrowing costs 14 times in a row since December 2021.
The central bank is expected to raise interest rates again on Thursday to 5.5% from 5.25%, although economists and investors believe this may be the latest increase in the institution’s attempts to stifle inflation risks in an economy that is showing signs of slowing.
The Organization for Economic Co-operation and Development said it expects the British economy to grow by 0.3% in 2023, unchanged from its forecast in June, and the second worst performance among rich economies after Germany.
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