Three extra UK rate of interest cuts this yr, predicts IMF | EUROtoday

The Bank of England may reduce rates of interest three extra instances this yr regardless of the UK grappling with higher-than-expected inflation, the International Monetary Fund (IMF) has mentioned.

The organisation predicted UK inflation could be the very best on the earth’s superior economies this yr at 3.1%, largely as a result of increased payments, together with for power and water.

The fund additionally mentioned the UK economic system would develop lower than beforehand predicted, up 1.1% in 2025 as a substitute of 1.6%, due to the worldwide 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 nonetheless forward of predictions for France, Italy and Germany.

US President Donald Trump’s tariffs, a steep enhance in borrowing prices and a success from inflation all contributed to the downgrade.

IMF chief economist Pierre-Olivier Gourinchas informed reporters that the IMF anticipated three extra rate of interest cuts by the Bank of England in 2025 after a quarter-point reduce in February.

The report mentioned that the spike in inflation anticipated this yr could be a “temporary phenomenon” which would go away room for price cuts.

However, Trump tariffs may 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 Bank’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 large international locations.

“The report also clearly shows that the world has changed, which is why I will be in Washington this week defending British interests and making the case for free and fair trade,” 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 get rid of US tariffs on British items.

Mr Gourinchas mentioned the worldwide economic system nonetheless bore “significant scars” from the “severe shocks of the past four years”.

“It is now being severely tested once again,” he added.

The US progress forecast for this yr was given the largest downgrade amongst superior economies by the IMF becayse of uncertainty attributable to commerce tariffs.

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

Trump has made a flurry of bulletins on tariffs this yr – taxes charged on items introduced into the US from different international locations.

In a rising commerce warfare, the US has positioned tariffs of as much as 145% on Chinese 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 international locations, whereas suspending a lot increased charges for dozens of countries for 90 days.

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