The UK is set to face one of the highest inflation rates of any major economy in the world in a significant cost of living blow to Britons.
The Organisation of Economic Co-operation and Development (OECD) predicts that UK inflation will surge, with Britain experiencing the highest level among the G7 group of advanced economies this year.
It is expected to reach 3.5% in 2025, 0.4 percentage points higher than its previous forecast.
It will remain above the Bank of England's 2% target in 2026, at 2.7%, with soaring food prices pushing up the cost of living.
This would see the UK suffering the second highest rate of inflation in the G7 next year, behind only the US, according to the report.
Growth is set to reduce sharply from 1.4% this year to 1% in 2026, the global policy forum added.
Higher taxes and spending cuts will be a drag on UK growth next year, the Chancellor was warned ahead of her Budget in November, as Britain continues to face a hit from US President Donald Trump's trade tariff increases and one of the highest inflation rates among the G7 economies.
A "tighter fiscal stance", meaning higher taxes and reduced government spending, is expected to weigh down on the UK economy, the OECD said.
While the influential organisation nudged up its 2025 forecast for UK gross domestic product (GDP) from the 1.3% it predicted in June, it kept the outlook unchanged for 2026 in what will mean a steep pull back in growth over the year ahead.
In its interim economic outlook, it said the UK would be held back by "a tighter fiscal stance, higher trade costs and uncertainty" which it said would "drag on external and domestic demand".
It comes ahead of the Government's autumn Budget, with the Chancellor under pressure to further raise taxes to help balance the books.
See also: Blow for Reeves as business output slows sharply in September
Rachel Reeves, who is set to lay out her fiscal plans on November 26, said the 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".
She added: "But I know there is more to do to build an economy that works for working people - and rewards working people. That is what I'm determined we deliver through our plan for change."
The UK economy grew by 0.7% over the first three months of the year and by 0.3% over the second quarter, official figures show.
The OECD also warned that growth in the world's economy will noticeably weaken over the rest of the year as higher US tariffs take effect, dampening global trade and investment.
The global economy was stronger than expected over the first half of 2025 but activity will "soften noticeably in the second half of this year", the OECD said.
This is partly due to "front-loading" delivering a boost to goods production and trade - referring to a rush of imports over the first half.
This has happened as businesses made more shipments as they tried to get ahead of steeper levies on their exports, as a result of Trump's policy changes in the US.
It meant industrial production growth outpaced 2024's average in most advanced economies over the first half of 2025, the OECD found.
Strong levels of investment in technology sectors, particularly artificial intelligence (AI), also bolstered activity in the US and Japan.
But as front-loading grinds to a halt, higher tariffs take effect, and lingering uncertainties dampen investment and trade, economic growth is expected to slow.
Trade between the US and China, the world's two largest economies, has declined sharply in recent months, the OECD said.
Global GDP is projected to decrease from 3.3% in 2024 to 3.2% in 2025, and 2.9% in 2026.
However, 2025's figure is 0.3 percentage points higher than the OECD's previous forecast set out in June.
