UK inflation rate to be highest among G7 nations, predicts Paris-based OECD

Though the British government has taken many steps to curb inflation and the central bank too has increased the bank interest rate many times in the recent past, the UK may have the highest inflation rate among the world's richest nations this year. The Paris-based Organisation for Economic Co-operation and Development (OECD) has said in its report that the inflation rate in the UK may touch 7.2 per cent.

Inflation in UK goes up

In the earlier forecast of June, the inflation rate was projected to be 6.9 per cent. It was the highest inflation rate among G7 nations and the third highest rate among G20 economies. The Consumer Price Index in the UK rose from 6.8 per cent in July to 7 per cent in August due to increased fuel prices.

OECD warns

The OECD has estimated that the UK economy would grow by 0.3 per cent this year. It may be the second lowest economic growth among the G-7 countries after Germany, which may slip into recession. It also said that the UK economy may rebound next year and it may register a growth rate of 0.8%, still lagging behind many G20 nations.

Global slowdown in 2024?

The OECD also predicted that a slowdown is looming large over the world in 2024. It said in its interim economic outlook that economic activities have weakened in the eurozone and the UK. This reflects the lagged effect on incomes from the large energy price shock in 2022 and the comparative importance of bank-based finance in many European economies.

Will Bank of England again raise rate?

In an attempt to arrest inflation, the Bank of England has increased the bank rates several times. The economists expect it to further raise the bank rate by about 0.25 percentage points. But central banks of other economies of Europe have adopted a 'wait and watch' approach.

Impact of Brexit?

Some economists said earlier that the rising inflation in the UK is the result of it quitting the European Union. They argue that after quitting the common market system, the UK has lost many export avenues, resulting in revenue and job loss.

FAQs

Q1. Why has the Consumer Price Index of the UK increased recently?
A1. The Consumer Price Index in the UK rose from 6.8 per cent in July to 7 per cent in August due to increased fuel prices. The fuel prices went up due to the Russia-Ukraine war.

Q2. What has the OECD predicted about the UK?
A2. The Organisation for Economic Co-operation and Development has said in its interim economic outlook that the inflation rate in the UK may touch 7.2 per cent.