UK interest rates higher for longer due to Budget, says OECD
The OECD predicted that UK economic growth would get stronger, rising to 1.7% in 2025, “boosted by the large increase in public expenditure set out in the autumn Budget”.
In October, Reeves set out plans to increase public spending by nearly £70bn per year of extra, funded through tax rises and more borrowing.
On Wednesday, the OECD said that UK interest rates, which currently stand at 4.75%, are expected to fall back to 3.5% by early 2026.
It said that this was partly down to inflation coming in higher than expected, so there is not as sharp a drop as previously forecast.
Currently, it expects that inflation will stand at 2.7% next year, up from the 2.4% previously expected.
It is then forecast to fall back to 2.3% in 2026, remaining above the Bank of England’s target of 2%.
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