London Daily

Focus on the big picture.
Thursday, Jul 31, 2025

IMF warns Bank of England not to be too slow to raise interest rates

IMF warns Bank of England not to be too slow to raise interest rates

The International Monetary Fund urged the Bank of England on Tuesday to avoid an "inaction bias" when it comes to raising interest rates as it forecast British inflation would hit a 30-year high of around 5.5% next year.

The BoE has said rates will need to rise to ensure that consumer price inflation - currently 4.2% - returns to its 2% target in the next couple of years.

But the central bank held off from a widely expected rate rise last month due to concern about the impact of the end of the government's job furlough programme, and is expected to do so again on Thursday due to the spread of the Omicron coronavirus variant.

The IMF, in an annual report on Britain's economy, said the BoE faced difficult trade-offs but should not delay too long.

"It would be important to avoid inaction bias, in view of costs associated with containing second-round impacts. Careful communication would be needed to lay the groundwork with markets for potentially more frequent policy moves," it added.

A global inflation surge due to higher energy prices and supply-chain bottlenecks created by the COVID-19 pandemic has been exacerbated in Britain by Brexit barriers to trade and migration.

Asked if the BoE should have raised rates in November, IMF Managing Director Kristalina Georgieva told reporters the central bank "has been working with sound judgement" and noted there was an important meeting this week.

The IMF said Britain had recovered more strongly than expected from the pandemic but the latest Omicron variant was likely to cause a "mild slowdown" over the next three months.

Georgieva said Omicron could exacerbate inflation pressures in supply chains but a return to the severe lockdowns seen last year looked unlikely.

The IMF also said the BoE should also "take the earliest opportunity" to clarify how much it intended to reduce its 895 billion pounds ($1.18 trillion) of asset purchases to restore focus primarily on interest rates.

The BoE is due to complete its government bond purchases this week and has said it will stop reinvesting the proceeds of maturing bonds once Bank Rate rises to 0.5%.

GROWTH FORECAST UNCHANGED


The IMF believes Britain's economy will expand by 6.8% this year and 5.0% in 2022, after shrinking by a historic 9.8% in 2020 when it felt the full force of the pandemic.

However, it said British output would be 2.0%-2.5% smaller than its pre-pandemic trend.

Brexit dealt significant damage to trade with the European Union and there would be further difficulties when Britain implements customs checks on EU imports on Jan. 1, Georgieva said.

The IMF broadly welcomed the approach to fiscal policy taken by Britain's finance minister, Rishi Sunak, who said the report backed his decision to rein in stimulus measures at October's budget.

But Britain should be ready to reinstate its furlough programme and extra assistance for the poorest households if there are significant new lockdowns, the IMF said.

The government should also consider extra fiscal tightening next financial year rather than leaving more for 2023-2024, and look at raising the tax burden on wealthier households to boost investment in infrastructure, skills and decarbonisation.

($1 = 0.7557 pounds)

Newsletter

Related Articles

0:00
0:00
Close
Former Judge Charged After Drunk Driving Crash Kills Comedian in Brazil
Jeff Bezos hasn’t paid a dollar in taxes for decades. He makes billions and pays $0 in taxes, LEGALLY
China Increases Use of Exit Bans Amid Rising U.S. Tensions
IMF Upgrades Global Growth Forecast as Weaker Dollar Supports Outlook
Procter & Gamble to Raise U.S. Prices to Offset One‑Billion‑Dollar Tariff Cost
House Republicans Move to Defund OECD Over Global Tax Dispute
Botswana Seeks Controlling Stake in De Beers as Anglo American Prepares Exit
Trump Administration Proposes Repeal of Obama‑Era Endangerment Finding, Dismantling Regulatory Basis for CO₂ Emissions Limits
France Opens Criminal Investigation into X Over Algorithm Manipulation Allegations
A family has been arrested in the UK for displaying the British flag
Mel Gibson refuses to work with Robert De Niro, saying, "Keep that woke clown away from me."
Trump Steamrolls EU in Landmark Trade Win: US–EU Trade Deal Imposes 15% Tariff on European Imports
ChatGPT CEO Sam Altman says people share personal info with ChatGPT but don’t know chats can be used as court evidence in legal cases.
The British propaganda channel BBC News lies again.
Deputy attorney general's second day of meeting with Ghislaine Maxwell has concluded
Controversial March in Switzerland Features Men Dressed in Nazi Uniforms
Politics is a good business: Barack Obama’s Reported Net Worth Growth, 1990–2025
Thai Civilian Death Toll Rises to 12 in Cambodian Cross-Border Attacks
TSUNAMI: Trump Just Crossed the Rubicon—And There’s No Turning Back
Over 120 Criminal Cases Dismissed in Boston Amid Public Defender Shortage
UN's Top Court Declares Environmental Protection a Legal Obligation Under International Law
"Crazy Thing": OpenAI's Sam Altman Warns Of AI Voice Fraud Crisis In Banking
The Podcaster Who Accidentally Revealed He Earns Over $10 Million a Year
Trump Announces $550 Billion Japanese Investment and New Trade Agreements with Indonesia and the Philippines
US Treasury Secretary Calls for Institutional Review of Federal Reserve Amid AI‑Driven Growth Expectations
UK Government Considers Dropping Demand for Apple Encryption Backdoor
Severe Flooding in South Korea Claims Lives Amid Ongoing Rescue Operations
Japanese Man Discovers Family Connection Through DNA Testing After Decades of Separation
Russia Signals Openness to Ukraine Peace Talks Amid Escalating Drone Warfare
Switzerland Implements Ban on Mammography Screening
Japanese Prime Minister Vows to Stay After Coalition Loses Upper House Majority
Pogacar Extends Dominance with Stage Fifteen Triumph at Tour de France
CEO Resigns Amid Controversy Over Relationship with HR Executive
Man Dies After Being Pulled Into MRI Machine Due to Metal Chain in New York Clinic
NVIDIA Achieves $4 Trillion Valuation Amid AI Demand
US Revokes Visas of Brazilian Corrupted Judges Amid Fake Bolsonaro Investigation
U.S. Congress Approves Rescissions Act Cutting Federal Funding for NPR and PBS
North Korea Restricts Foreign Tourist Access to New Seaside Resort
Brazil's Supreme Court Imposes Radical Restrictions on Former President Bolsonaro
Centrist Criticism of von der Leyen Resurfaces as she Survives EU Confidence Vote
Judge Criticizes DOJ Over Secrecy in Dropping Charges Against Gang Leader
Apple Closes $16.5 Billion Tax Dispute With Ireland
Von der Leyen Faces Setback Over €2 Trillion EU Budget Proposal
UK and Germany Collaborate on Global Military Equipment Sales
Trump Plans Over 10% Tariffs on African and Caribbean Nations
Flying Taxi CEO Reclaims Billionaire Status After Stock Surge
Epstein Files Deepen Republican Party Divide
Zuckerberg Faces $8 Billion Privacy Lawsuit From Meta Shareholders
FIFA Pressured to Rethink World Cup Calendar Due to Climate Change
SpaceX Nears $400 Billion Valuation With New Share Sale
×