The IMF has warned that above-target inflation risks becoming entrenched in the UK as it forecast the country would see the highest price growth of any G7 nation over the next two years.
The Fund’s chief economist said the Bank of England should be wary of lowering interest rates before it has quelled the latest outbreak of inflation, adding that the central bank is likely to hold off further reductions in its key rate until 2026.
In its World Economic Outlook, the Fund predicted UK consumer prices would rise an annual 3.4 per cent this year and 2.5 per cent next, faster than other G7 countries including the US, where prices have been pushed up by President Donald Trump’s tariffs. The BoE has forecast that inflation will peak at 4 per cent later this year.