UK will experience the highest level of inflation among all advanced economies this year, based on data from the Organization for Economic Co-operation and Development (OECD).
UK is set to report headline inflation at a reading of 6.9% this year, above the OECD average of 6.6% for 2023. Among the countries analyzed in the latest OECD economic survey, only Argentina and Turkey are expected to have higher inflation rates than the U.K. in this year. Sanctioned Russia is forecast to experience inflation below 5.4% in 2023.
U.K. headline inflation "It is projected to slow due to lower energy prices and fall close to the target by the end of 2024," the OECD said. "Core inflation is expected to continue due to strong services inflation, only easing to 3.2% in 2024."
This added pressure to the Bank of England, which raised rates by another 25 basis points in May to bring the key interest rate to 4.5%. Speaking before British lawmakers, Governor Andrew Bailey last month said that the bank's forecasting model was not working well after the central bank repeatedly failed to predict some increases in inflation.
The BoE is expected to raise rates again when it meets on June 22. In terms of growth expectations, the Paris-based institution said that U.K. GDP will be “modest” at 0.3% this year, but will rise to 1% in 2024. In addition, unemployment is expected to rise to 4.5% in 2024.
