The International Monetary Fund’s (IMF) latest report has revealed that UK growth forecasts have marginally improved this year, whilst warning that interest rates could remain ‘higher for even longer’ due to "significant swings" in policy from new governments, which has caused increased "uncertainty" over economic growth.
The IMF predict that the UK economy will see an increase of 0.7% this year, a marginal lift compared to its 0.5% forecast in April. Details from the World Economic Update also forecast that it will remain unchanged at 1.5% in 2025.
The Washington-based body said, “services price inflation is holding up progress on disinflation” adding that “nominal wage growth remains brisk”.
It comes just before The Office for National Statistics release the latest cost-of-living figures, which will be the first inflation reading under Keir Starmer’s newly elected government.
The IMF added: “Upside risks to inflation have thus increased, raising the prospect of higher-for-even-longer interest rates, in the context of escalating trade tensions and increased policy uncertainty.”
The Bank of England base rate has remained at a 16-year high of 5.25% since last August.
March 2020 was the last time the base rate was cut, and the Monetary Policy Committee are due to reconvene on August 1.
Eurozone growth is expected to reach 0.9% in 2024, whilst the IMF maintained its forecast that the world economy will grow by 3.2% in 2024. It also predicts that there will be slightly stronger growth in 2025 at 3.3%.
