Tue, 14 Oct 2025

Tue, 14 Oct 2025 UK will be second-fastest-growing G7 economy, IMF predicts

But the UK is also predicted to suffer the highest rate of inflation in the G7 both this year and next.
The IMF warns that the UK still faces stronger inflation than other similar countries, with prices forecast to rise by 3.4% this year and 2.5% in 2026. However, it believes that higher inflation is likely to be temporary and fall to 2% by the end of next year. The IMF's global outlook was dominated by the reaction to US tariffs, a weakened dollar, and questions about the independence of the US Federal Reserve. The Fund said resilience was "giving way to warning signs" and that US tariffs costs were starting to feed through to higher prices for American shoppers. In an interview with the BBC, the IMF's chief economist Pierre-Olivier Gourinchas said the worst consequences of a global trade war had been tempered. However, he warned that the Bank of England should be "very cautious" about cutting interest rates due to high expectations around future inflation. The IMF also pointed to "excessively optimistic" expectations around AI, which could trigger a market correction. It noted that markets appeared "complacent" and that the concentration of overvaluation of tech stocks on a small number of companies was now substantially higher than at the dotcom bubble in 2000. The UK's Chancellor Rachel Reeves said people sensed the economy was "stuck" and would use the IMF gathering to try to provide reassurance over the UK's financial stability. However, shadow chancellor Sir Mel Stride said the IMF assessment made for "grim reading", highlighting the impact of inflation on UK households.
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