HOUSEHOLDS will be punished by the UK having the highest level of inflation in a major economy, experts say.
Hard-up Brits will suffer even more as the rate will hit 3.5 per cent hitting families in the pocket.
It comes as food inflation could hit 6 per cent by the end of the year, according to the retail sector.
The warnings from the international Organisation for Economic Co-operation and Development will put more pressure on Rachel Reeves ahead of the Budget.
Economists from the influential organisation say that UK inflation will surge.
Inflation in the UK is expected to reach 3.5% in 2025, 0.4 percentage points higher than its previous forecast.
This is also down to the impact of the national insurance taxes feeding through and the national minimum wage rises.
The Chancellor was also warned that that higher tax and spending cuts will be drag on UK growth for next year – with inflation also set to surge here.
The intervention came from the Organisation of Economic Co-Operation and Development in an interim report published today.
The warning on global growth comes as businesses “front-loaded” production and trade ahead of the US levies being implemented earlier this year which will slow global growth this year.
However, the Chancellor has been told to expect a minor upgrade in expected growth for the UK this year as she plans for her showpiece November event.
The economy will grow by 1.4 per cent this year which is 0.1 per cent high that the OECD forecast in June.
But UK growth will stick rigid to 1 per cent growth next year as previously forecast.
Ms Reeves said today: “These figures confirm that the British economy is stronger than forecast – it has been the fastest growing of any G7 economy in the first half of the year.
“But I know there is more to do to build an economy that works for working people – and rewards working people.”
The Chancellor is still looking at filling a £30 billion black hole ahead of the Budget.
The figures will be a disappointment as Ministers list growth as their number one mission.
The OECD said that activity will “soften noticeably in the second half of this year” after the stronger start to the year.
The growth for the first half of this year outpaced that of last year’s average in advanced economies.
Major investment from Japan and the US in sectors such as AI also led to the rise this year.
But the impact of Trump’s tariffs has led to a decline of trade between the world’s two main economies, China and the US.
The OECD findings show world growth decreasing from 3.3 per cent in in 2024 to 3.2% in 2025, and 2.9% in 2026.
However, this year’s figure is 0.3 percentage points higher than the OECD’s previous forecast set out in June.
A tighter fiscal policy, meaning higher taxes and reduced government spending, is expected to help drag on UK economic activity in the year ahead.
The UK is also among the economies experiencing a sharper rise in food prices, the OECD said.
It comes as Ministers put growth a Inflation in the UK is expected to reach 3.5% in 2025, 0.4 percentage points higher than its previous forecast.
Shadow Chancellor, Sir Mel Stride said: “The OECD confirms what hard -working families already feel – under Labour, Britain is in a high tax, high inflation, low growth doom loop.
“Rachel Reeves seems to think the solution is yet more tax rises. The UK is now teetering on the edge of stagflation, all driven by Labour’s economic mismanagement.
“This should be a wake-up call to the Chancellor: you can’t tax your way to growth.”
