OECD says Bank of England can hold steady as UK inflation cools faster than expected

The Organisation for Economic Co-operation and Development has given the Bank of England something rare in central banking: a permission slip to do nothing. In its September 2026 Interim Economic Outlook, the OECD concluded that UK monetary policy is already restrictive enough to bring inflation under control, meaning the BoE can hold its Bank Rate at 3.75% without risking a price spiral. The timing is notable. The BoE voted 6-3 on September 17, 2026 to keep rates unchanged at that level, even as policymakers acknowledged inflation could breach 4% in early 2027 if energy markets stay volatile. The OECD’s endorsement essentially tells markets: the current stance is working, and patience is the right call. Inflation is cooling, but not cold UK Consumer Price Index came in at 3.1% in August 2026, a figure that sits uncomfortably above the BoE’s 2% target but well below the peaks that rattled the economy in prior years. The OECD now projects headline inflation will average 3.1% for the full year of 2026, a meaningful downward revision from its earlier estimates of 3.6% to 3.7%. For 2027, the forecast drops further to 2.6%. The OECD sees room for a rate cut in the third quarter of next ...