The Bank of England chief economist is more “comfortable” about the direction of inflation, but this is because the Organisation for Economic Cooperation and Development has increased its forecast for the cost of living in the UK.
“It’s always a question of risk balance. You know, I’ve been saying that risk balance is probably more of an inflationary aspect than it is to leave it to communication.”
Central Bank economists spoke at the inaugural Pictet Institute workshop in 2025 in Geneva this morning.
But the pill (pictured) adds: “I think that this may be changing over time, and as a market repetition. Personally, I’m more comfortable now than I was six years old, nine, 12 months ago.”
However, his comments posted in the OECD said the UK will be hit by the highest inflation rate of the G7 Group in the world’s most developed countries this year and will rise with higher payroll taxes and minimum wages and food prices.
The temporary economic outlook for Paris-based IQ raises its forecast for UK inflation this year to a 3.1% forecast and raises its forecast for 2026 to 2.7%.
The UK’s inflation rate in August was the highest in G7, while BOE predicted it will peak at 4% in September, double the central bank’s 2% target. BOE believes that inflation will return 2% in spring 2027 alone.
The agency also predicts that the UK’s growth rate this year is 1.4%, up from 1.1% last year, the second fastest after the G7.
But next year, after the U.S., Canada and Germany, the IQ predicts that the UK’s economy will drop to 1%, which is the weight of “stricter fiscal attitudes and higher trade costs”.
Prime Minister Rachel Reeves said: “These numbers confirm that the UK economy is stronger than forecasts – it is the fastest growth of any G7 economy in the first half of the year.
“But I know there is more to do to build an economy that works for the working people and reward workers. That’s what I’m sure of is what we achieve through our change program.”
Conservative leader Kemi Badenoch said the OECD report was a “verdict on Starmer’s weak economic management.”
Last week, the bank’s nine monetary policy committees Vote 7-2, keeping bank interest rates at 4%, There are two external pigeons, Swati Dhingra and Alan Taylor, which forces you to lower your interest rate by a quarter to 3.75%.
The cut to lower interest rates to its lowest level since March 2023 is the third cut this year, fifth place since August last year.
But the committee’s minutes added, “Be alert to the risk that this temporary increase in inflation could put additional upward pressure on the wage and price setting process.”
Earlier this month, Bank of England Governor Andrew Bailey warned that there were “more questions” about when central banks could lower interest rates again.
“Although I think this path will continue to decline over time, as policies are still restricted …. Now there are more questions about exactly when and how we can take these further steps quickly,” he said.
Most traders no longer expect the reduction rate to drop this year, and the next drop will only be completely reduced in April next year.
