UK Inflation Hits 4% as OECD Slashes Growth Forecast

The OECD has raised its inflation outlook for the United Kingdom and lowered its growth forecast for 2024, linking the shift to risks stemming from the conflict in the Middle East.

The updated projections place the UK among the highest-inflation economies in the G7 this year, while also pointing to a softer expansion than previously expected.

What changed in the OECD outlook

The OECD now forecasts UK inflation at 4% in 2024. That is a marked revision from its 2.5% estimate published in December.

For growth, the OECD expects the UK economy to expand by 0.7% in 2024, down from an earlier projection of 1.2% . In the G7 comparison cited by the OECD, only the United States is projected to record higher inflation this year, while only Italy is expected to post weaker growth.

Global backdrop: growth slows, inflation remains elevated

Beyond the UK, the OECD projects global growth of 2.9% this year. It also expects G20 inflation to run at 4% before easing to 2.7% in 2025.

The OECD’s baseline scenario assumes that energy-market disruptions fade, allowing prices for oil, gas, and fertilizers to decline from mid-year. That assumption is central to the path for inflation and activity described in the report.

Energy and food are the key transmission channels

The OECD warns that a longer-lasting conflict could create substantial global energy shortages. In that case, the report says food prices could also rise if fertilizer costs remain high and weigh on crop yields.

For the UK, the mechanism is straightforward: higher energy prices can lift household bills and business costs, which can keep inflation higher for longer while also restraining demand and investment. The OECD frames these pressures as a near-term challenge that can spill across borders through commodity markets.

Policy focus: targeted support and energy resilience

The OECD calls for timely and targeted government measures to help households and firms most exposed to higher energy prices. It also highlights domestic energy efficiency and reducing dependence on imported fossil fuels as priorities.

Important uncertainties remain. The OECD’s projections depend on easing energy disruptions from mid-year, and the report explicitly notes that a prolonged conflict could alter the outlook through energy and food-price channels.