{"id":10265,"date":"2024-12-05T14:21:37","date_gmt":"2024-12-05T14:21:37","guid":{"rendered":"https:\/\/en.econostrum.info\/?p=10265"},"modified":"2024-12-05T14:21:37","modified_gmt":"2024-12-05T14:21:37","slug":"uk-economy-interest-rates-tax-increase-analysis","status":"publish","type":"post","link":"https:\/\/en.econostrum.info\/uk-economy-interest-rates-tax-increase-analysis\/","title":{"rendered":"UK Interest Rates Set to Fall Slower Than Expected Amid Tax Rises and Spending Hikes"},"content":{"rendered":"<p><strong>UK interest rates<\/strong> are expected to decline at a slower pace than previously forecast, influenced by the <strong>tax increases<\/strong>, expanded <strong>public spending<\/strong>, and elevated <strong>borrowing<\/strong> outlined in Rachel Reeves\u2019 autumn Budget. The <strong>Organisation for Economic Co-operation and Development<\/strong> (OECD) projects that interest rates, currently at 4.75%, will drop to 3.5% by early 2026. However, the anticipated decrease is less steep due to heightened consumer spending triggered by <strong>fiscal policies<\/strong>.<\/p>\n<h2>OECD Revises Inflation and Interest Rate Forecasts<\/h2>\n<p>The OECD has revised its <a href=\"https:\/\/en.econostrum.info\/uk-inflation-surges-to-2-3-in-october\/\"><strong>inflation<\/strong><\/a>\u00a0outlook, predicting that headline inflation will rise to 2.7% in 2024, up from its prior estimate of 2.4%. Inflation is then expected to moderate to 2.3% by 2026, though it will remain above the <strong>Bank of England\u2019s<\/strong> target of 2%. This upward revision is attributed partly to the increased <strong>fiscal activity<\/strong> outlined in the autumn Budget.<\/p>\n<h2><strong>Economic Growth Prospects Brighten Despite Short-Term Slowdown<\/strong><\/h2>\n<p>UK <strong>GDP<\/strong> is now forecast to grow by 0.9% in 2023, a slight downgrade from the earlier projection of 1.1%, following weak third-quarter growth of 0.1%. Despite this short-term dip, the economy is expected to strengthen, with <strong>GDP growth<\/strong> predicted to reach 1.7% in 2024, driven by significant <strong>public spending<\/strong> increases. Growth is projected to moderate to 1.3% in 2026.<\/p>\n<h2><strong>Spending Boost Drives Growth Amid Fiscal Tightening<\/strong><\/h2>\n<p>The autumn Budget introduced nearly \u00a370 billion in additional annual <strong>public spending<\/strong>, supported by <a href=\"https:\/\/en.econostrum.info\/tax-hikes-uk-budget-decline-wage-growth\/\"><strong>tax hikes<\/strong><\/a> and increased borrowing. The OECD highlighted that while <strong>fiscal policy<\/strong> will tighten over 2024\u20132026, the scale of tightening is less severe than previously anticipated due to these expansive measures. The report emphasized the interplay between fiscal <strong>stimulus<\/strong> and broader economic trends, noting its impact on <strong>growth<\/strong> and inflation.<\/p>\n<h2><strong>Global Economy Remains Resilient Amid Risks<\/strong><\/h2>\n<p>On a global scale, the OECD expects <strong>economic growth<\/strong> of 3.2% in 2023 and 3.3% in 2024, marking slight upgrades from previous forecasts. Despite acknowledging substantial <strong>risks<\/strong> and uncertainties, the organisation underscored the <strong>resilience<\/strong> of the global economy over the coming years.<\/p>\n<p>These projections offer a cautiously optimistic view of the <strong>UK<\/strong> and global economies, highlighting the interplay of fiscal <strong>policy<\/strong>, <a href=\"https:\/\/www.gov.uk\/government\/publications\/guidance-on-inflation\" target=\"_blank\" rel=\"noopener\"><strong>inflation<\/strong><\/a>, and growth in shaping economic prospects.<\/p>\n","protected":false},"excerpt":{"rendered":"<p><strong>Interest rate<\/strong> declines in the UK are expected to be slower than anticipated, with <strong>higher inflation<\/strong> forecasts driven by <strong>fiscal policies<\/strong>, according to the OECD&#8217;s latest report. The report also highlights global <strong>economic resilience<\/strong> amid ongoing challenges.<\/p>\n","protected":false},"author":6,"featured_media":10268,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[1,44],"tags":[],"class_list":["post-10265","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy","category-news","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33","no-featured-image-padding"],"_links":{"self":[{"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/posts\/10265","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/comments?post=10265"}],"version-history":[{"count":0,"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/posts\/10265\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/media\/10268"}],"wp:attachment":[{"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/media?parent=10265"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/categories?post=10265"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/tags?post=10265"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}