UK does not need higher interest rates - OECD
By Abigail Townsend
Date: Wednesday 23 Sep 2026
(Sharecast News) - The Bank of England does not need to put up interest rates, a leading global think tank argued on Wednesday, even as worldwide growth was forecast to slow.
According to the Organisation for Economic Co-operation and Development's interim economic outlook, global growth has moderated following the outbreak of war in the Middle East, which has thrown global energy markets into turmoil and ramped up inflationary pressures.
It expects global economic growth to slow to 2.9% this year from 3.4% in 2025, although that was a slight improvement on its previous forecast for 2.8%. Guidance for G20 headline inflation was increased by 0.1 percentage point to 4.1%, up notably on last year's 3.4%.
However, the Paris-based body said that some countries were proving more resilient than expected, boosted by sizeable oil inventories and discretionary government support.
It still expects the UK GDP to slow from 1.3% in 2025 to 1.1%. But the latest figure was a 0.2pps improvement on its previous guidance, while its inflation forecast was lowered by 0.6pps to 3.1%.
As a result, while it acknowledged that further policy rate increases were likely in other major economies, including the US and the Eurozone, "in contrast, policy rates are expected to remain unchanged in Canada and in the United Kingdom until late next year".
Stefano Scarpetta, OECD chief economist, told the Financial Times that the UK was "starting from a different position" on monetary policy, with its key rate already high enough to restrict inflation.
The Bank of England last week left Bank Rate on hold at 3.75%, but warned the cost of borrowing would rise should inflation - which currently stands at 3.1% - worsen. However, the Monetary Policy Committee has to balance its hawkish stance on inflation with sluggish economic growth.
OECD secretary-general Mathias Cormann said: "Global growth has held up better than expected, but the buffers that absorbed the energy shock are being depleted. Growth is weaker than last year and inflation is rising again.
"Governments need to target support where it is most needed and get public spending on a sustainable track."
Neil Wilson, investor strategist at Saxo UK, said: "The OECD is absolutely right - the BoE can, and I would add ought to, avoid raising interest rates, because it's starting from a very different position to other countries. The market is mispriced way too hawkish.
"According to the OECD, the BoE can afford to leave its benchmark steady until well into 2027, after which the next move is to cut. Markets on the other hand are pricing in four hikes through the end of next year. Britain's policy rate is already quite restrictive and there is yet no clear evidence of second-round impacts on inflation."
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