The OECD said the Bank of England can hold its policy rate at 3.75% until late
2027 and cut 25bp in Q3 next year, arguing policy is already sufficiently tight
to restrain inflation. It warned the energy crisis is adding to global price
pressures. The view contrasts with forecasts for the Fed, ECB and Bank of Japan
to tighten further in coming months. BoE Governor BAILEY this month warned
households and firms that policy may have to tighten and projected inflation
above 4% next year. Markets currently price four 25bp BoE hikes by end of next
year. OECD chief economist Scarpetta said the UK’s starting point differs from
other countries, noting the key rate is high enough to curb inflation and that
UK inflation has run below OECD forecasts this year.
