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OECD Expects UK Economic Activity to Slow in Near Term Amid Energy Price Surge, Tight Fiscal Policy

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UK economic activity is projected to slow in the near term, driven by the supply shock from the energy price surge caused by the Middle East war and tight fiscal policy, among other factors, according to a Wednesday report.

The Organisation for Economic Co-operation and Development expects UK gross domestic product to grow 0.9% in 2026 before picking up to 1.1% in 2027.

Meanwhile, annual headline inflation is estimated to hit 3.7% in 2026, owing to renewed global energy inflation, before easing to 2.4% in 2027. Annual core inflation is forecast to reach 3.1% before falling to 2.7% the following year.

The OECD expects UK monetary policy "to look through the energy shock in 2026 and continue easing towards a neutral stance in 2027, reducing but not eliminating the drag on growth as fiscal policy will remain restrictive."

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