Three extra UK rate of interest cuts this 12 months, predicts IMF

The Financial institution of England might minimize rates of interest three extra occasions this 12 months, because the UK grapples with higher-than-expected inflation, the Worldwide Financial Fund (IMF) has mentioned.

The organisation predicted UK inflation would be the highest on the earth’s superior economies this 12 months at 3.1%, largely as a result of greater payments, together with for power and water.

The fund additionally mentioned the UK economic system will develop lower than beforehand predicted, up 1.1% in 2025 as a substitute of 1.6%, because of the world fallout from US commerce tariffs.

The report comes as prime financial policymakers meet in Washington this week on the IMF’s spring gathering.

The downgrade within the outlook for the UK economic system is however forward of predictions for France, Italy and Germany.

Trump tariffs, a steep improve in borrowing prices, and successful from inflation all contributed to the downgrade.

IMF chief economist Pierre-Olivier Gourinchas advised reporters that the IMF anticipated three extra rate of interest cuts by the Financial institution of England in 2025 after a quarter-point minimize in February.

Nonetheless, Trump tariffs might additionally push down the tempo of UK worth rises as items are diverted away from the US.

The IMF expects UK inflation to gradual to 2.2% by 2026, near the Financial institution’s 2% goal.

In response to the predictions, Chancellor Rachel Reeves highlighted how the IMF nonetheless noticed stronger financial progress within the UK in 2025 than in Europe’s different huge nations.

“The report additionally clearly exhibits that the world has modified, which is why I shall be in Washington this week defending British pursuits and making the case without cost and honest commerce,” Reeves mentioned.

She is because of meet US Treasury Secretary Scott Bessent the place she is predicted to make Britain’s case for a commerce settlement with Washington that will decrease or eradicate US tariffs on British items.

Mr Gourinchas mentioned the worldwide economic system “nonetheless bears vital scars” from the “extreme shocks of the previous 4 years”.

“It’s now being severely examined as soon as once more,” he added.

The US progress forecast for this 12 months was given the most important downgrade amongst superior economies by the IMF as a result of uncertainty brought on by commerce tariffs.

US progress is now anticipated to be 1.8% this 12 months, down from the IMF’s estimate of two.7% in January.

President Donald Trump has made a flurry of bulletins on tariffs this 12 months – taxes charged on items introduced into the US from different nations.

In a rising commerce battle, the US has positioned tariffs of as much as 145% on Chinese language items, whereas China has hit again with 125% on US merchandise.

The US has additionally launched a ten% tax on items from the overwhelming majority of different nations, whereas pausing a lot greater charges for dozens of countries for 90 days.

Trump says tariffs will encourage US customers to purchase extra American-made items, improve the quantity of tax raised, and result in large ranges of funding within the nation.