UK to be hit with highest inflation in G7 - OECD
By Abigail Townsend
Date: Tuesday 23 Sep 2025
(Sharecast News) - The UK is on track to have the highest inflation in the G7 this year, according to research from the Organisation for Economic Co-operation and Development, published on Tuesday.
The influential policy group raised its forecast for British inflation in 2025 to 3.5%, up from an earlier prediction for 3.1%.
It is then forecast to fall back to 2.7% in 2026.
UK inflation remains stubbornly above the Bank of England's long-term 2% target. The consumer price index currently stands at 3.8%, while food price inflation is 5.1%.
As a result, the BoE is taking a more cautious approach to monetary policy. It has cut rates three times this year, to 4%, but analysts are divided as to when the next reduction will come.
The OECD expects the central bank to cut the cost of borrowing twice more, in 2026.
The Paris-based body flagged higher food prices in the UK, as well as wage growth that remained "above levels consistent with inflation targets".
It also predicted that a "tighter fiscal stance, higher trade costs and uncertainty" would drag on both external and domestic demand in the UK.
As a result, while growth is expected to be 1.4% this year, up from 1.1% in 2024, it is forecast to fall back to 1.0% in 2026.
Globally, and the OECD acknowledged that economic growth had proven more resilient than initially expected in the first half.
But it noted that tariffs had ramped up since May, with an estimated effective rate of 19.5% as at the end of August - the highest since the Great Depression.
It continued: "While the full impact of tariff increases is still unfolding, early signs of effects are visible in consumer behaviour, labour markets and prices.
"Looking ahead, downside risks loom large: further tariff hikes, increased concerns about fiscal risks, renewed inflation pressures could weigh on growth."
The OECD expects global GDP growth to slow from 3.3% in 2024 to 3.2% in 2025 and 2.9% in 2026.
In the US growth is projected to decline more sharply, from 2.8% in 2024 to 1.8% this year and 1.5% next, due to tariffs, moderating net immigration and cuts to federal workforces.
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