Fund staff project UK inflation to peak below 4% in 2026 and return to 2% target by 2027 without further hikes.
International Monetary Fund staff concluded the Bank of England does not need to raise interest rates this year given the current energy price outlook. The assessment follows updated projections showing UK GDP growth at 1.0% in 2026, up from a 0.8% April estimate.
Inflation is expected to peak just below 4% at the end of 2026 before declining to the 2% target by late 2027. The IMF also urged the UK government to maintain deficit reduction efforts amid market pressures and implementation risks.
The British Pound showed little reaction, with GBP/USD trading 0.23% higher near 1.3355 after recovering early losses.