The International Monetary Fund has raised its growth forecast for the United Kingdom this year to 1 percent, up from 0.8 percent, saying the economy carried more momentum into recent global shocks than expected and that fears about the fallout from the Iran conflict have eased somewhat, the Guardian reported.
A modest upgrade
The revision, of about 0.2 percentage points, follows a stronger-than-expected start to the year, with output growing in the first quarter as spending and construction held up. It marks a turnaround from the spring, when the fund had trimmed its expectations amid worries about energy prices and geopolitical risk. The IMF's message was one of resilience rather than boom: growth of 1 percent is still modest by historical standards, but better than the fund had penciled in a few months earlier, Yahoo Finance reported.
Inflation and the Bank of England
The fund still sees inflation as a live concern, expecting it to remain elevated through this year before easing back toward the Bank of England's 2 percent target over the course of 2027. On that basis, the IMF indicated the central bank has some room to lower interest rates if price pressures continue to fade as expected, though it framed that as conditional on the data rather than a firm recommendation.
A political boost, and a caveat
The upgrade gives the UK government something to point to. The chancellor, Rachel Reeves, welcomed it as evidence that the government's economic approach is working, and as a sign the economy is better placed to weather the costs of the conflict. Opposition figures typically counter that headline forecasts say little about household finances; the fund itself stressed that risks remain.
Chief among those risks is the very conflict whose easing helped lift the forecast. The IMF's assessment reflects a period in which markets had calmed relative to the spring, but tensions between the United States and Iran have flared again in recent days, and a renewed disruption to energy supplies could push prices back up and undo some of the improvement. For now, the fund's verdict is cautiously more optimistic, with the emphasis on cautiously.
