IMF Upgrades UK Growth Forecast Despite Trade Tariffs

The International Monetary Fund has upgraded its growth forecasts for the UK and stated that the Bank of England might cut interest rates twice this year. The fund mentioned that global growth prospects have remained resilient despite the turmoil caused by tariffs announced by the United States in April. The UK, China, and the European Union have seen lowered tariffs ahead of an August 1 deadline. The IMF also upgraded its forecasts for the US economy, noting that the impact of President Trump's tariffs has not yet been felt globally.

The UK's growth outlook was raised by 0.1 percentage points to 1.2% in 2025, with a steady 1.4% growth estimate for 2026. The IMF suggested that the base rate could drop to 3.75% this year, indicating the possibility of two interest rate cuts as anticipated by traders. The UK is expected to be the third-fastest growing economy in the G7, following the US and Canada, while Germany is projected to have a stagnant GDP rate of 0.1% this year.

The US economy, despite being anticipated to be significantly impacted by tariffs, received a substantial upgrade of 0.3 percentage points in 2026 to a 2% GDP growth forecast. The world's largest economy is predicted to expand by 1.9% this year, a 0.1% increase from the previous forecast in April. The average tariff rate planned by the US on the rest of the world has decreased from 24% to around 17%, according to the IMF.

The global economy is forecasted to grow by 3% this year, up by 0.2 percentage points from April, and is expected to accelerate to 3.1% in 2026. The figures have been welcomed by the UK chancellor, Rachel Reeves, who emphasized the UK's position as the fastest-growing European economy in the G7. The IMF cautioned that the impact of trade protectionism is yet to fully materialize and highlighted the importance of global factors such as declining interest rates and currency value fluctuations.

According to the source: The Times.