OECD expects high borrowing costs in EU and UK to remain until 2025

The news: The OECD has warned that inflationary pressure could force the European Central Bank and Bank of England to hold current high lending benchmarks steady until 2025.

The numbers: The OECD’s Outlook projects global GDP would decline to 2.7% next year (from 2.9% in 2023), and only slightly pick-up to 3.0% in 2025 as price rises slow down.

The context: The intergovernmental organisation added that monetary policy should remain restrictive until there are clear signs that inflationary pressures are durably reduced. The projections are in keeping with an already strained financial backdrop, burdened not only by inflation but by increased geopolitical tensions, slower growth and weak consumer confidence in the region.

What was said: OECD's chief economist Clare Lombardelli said: “Governments really need to start confronting the mounting challenges that public finances face, particularly from ageing populations and climate change […] Governments need to spend smarter, and policy makers need to contain current and future fiscal pressures while preserving investment and rebuilding buffers to respond to future shocks.”