Economic storm clouds continue to gather as the OECD predicts a worrying combination of rising inflation and sluggish growth for the UK. Despite efforts to curb rising prices, the OECD report suggests that inflation has found a foothold in the UK economy, leaving households and policymakers navigating treacherous waters in 2025. While headline inflation has been trending towards the Bank of England's target, core inflation remains stubbornly high, with wage-driven price pressures persisting. This is likely to keep monetary policy restrictive for an extended period, which while necessary to anchor inflation, could prolong the squeeze on household finances and dampen economic growth prospects.

Furthermore, the UK's growth trajectory appears modest at best and fraught with risks, with limited fiscal space to confront possible shocks on the downside and higher domestic demand through the rundown of excess savings on the upside. Consequently, policymakers face a delicate balancing act, with the need to combat inflation without stifling growth, presenting a formidable challenge.