Faster UK recovery forecast

THE OECD predicts the British recovery will accelerate to around 2.7 per cent in 1994 despite the Budget. However, it questions whether the battle against inflation is won.

The organisation hints that base rates could fall following Kenneth Clarke's tightening of fiscal policy. In comments written before the Budget, it says: 'The course of interest rates will be influenced by progress on the fiscal side and by rate developments in Continental Europe.'

It says the Budget will shave about 0.25 per cent off its original growth estimates of almost 3 per cent for 1994/95. This would still leave a faster expansion than the Treasury foresees.

Although inflation pressures are for the moment benign, it questions whether a fundamental change in wage and price behaviour has occurred.