London Daily

Focus on the big picture.
Sunday, Aug 24, 2025

IMF warns rising prices will be worse in UK

IMF warns rising prices will be worse in UK

The International Monetary Fund (IMF) has doubled down on criticism of the chancellor's mini-budget, days after warning it will fuel rising prices.

The body, which works to stabilise economic growth, admitted tax cuts announced by Kwasi Kwarteng would boost growth in the short-term.

But it said the cuts would "complicate the fight" against soaring prices.

It expects high prices to last longer in the UK with only Slovakia out of the eurozone set to see higher inflation.

Inflation, which measures how the cost of living changes over time, is expected to peak at about 11.3% before the end of the year in the UK, according to the IMF's latest assessment of the global economy.

In each of the next two years, it expects price rises will average at about 9% - far above the Bank of England's target of 2%.

Although the UK economy is set to grow the fastest of the major economies included in the G7 group this year, it is projected to grind to a near-halt next year, with it expanding by just 0.3%.

The most recent figures included in the report by the influential financial institution do not fully, however, take into account the UK chancellor's recent mini-budget.


'Steady hand'


After Mr Kwarteng unveiled plans for huge tax cuts in the UK, the IMF criticised the plans warning they were likely to increase inequality and add to pressures pushing up prices.

It was an unusually outspoken statement from the IMF, which has a key role in acting as an early economic warning system.

The IMF said it understood the government's mini-budget aimed to boost growth, but it said that the tax cuts could speed up the pace of price rises, which the UK's central bank, the Bank of England, is trying to bring down.

Downing Street defended the chancellor's plans, with the Prime Minister's official spokesperson saying its policies aimed "to support British people at a time of global high prices" and said the IMF report showed "the global challenges that countries are facing".


The IMF warned the global economy was facing a downturn with "the worst yet to come" as war in Ukraine helps push prices higher around the globe.

"For many people 2023 will feel like a recession," it warned.

It said governments and central banks globally had to work together to help people through the turmoil.

The IMF's Pierre-Olivier Gourinchas told the BBC: "Imagine a car with two drivers at the front and each of them has a steering wheel - and one wants to go left and the other wants to go right."

He added: "One is the central bank trying to cool off the economy so that price pressures will ease, and the other one wants to spend more to support families... it's probably not going to work very well."

In the UK, the chancellor has already said he will bring forward his economic plan where he will spell out how he plans to pay for the tax cuts and provide an independent forecast on the UK economy's prospects, a move welcomed by the IMF.

However on Tuesday, government borrowing costs remained close to the levels seen at the height of the market turmoil last month despite fresh action from the Bank of England to try and stabilise financial markets.

The IMF also cautioned that governments would need to protect the least well-off from the impact of higher prices.

Poorer households often spend relatively more than others on food, heating, and fuel, it pointed out - all areas that have seen steep price rises as energy and grain exports have been restricted after the invasion of Ukraine.

And countries that are reliable on Russian gas in Europe are being hit particularly badly. Germany's economy, for example, is now predicted to contract next year.


Meanwhile, Russia's economy is expected to contract by 2.3% next year, the biggest fall of all the nations included in the projections.

Speaking on Monday, IMF boss Kristalina Georgieva noted that growth was also being dragged down in China by continued Covid restrictions, while in the US rising interest rates were "starting to bite".

At the first in-person meetings between the IMF and the World Bank since the pandemic, she said countries could "reduce the pain ahead of us in 2023" by acting together.

She added that the IMF will be pushing for major economies to carry on with their efforts to bring down the cost of living, even if they have a negative impact on economic growth.

If they don't do enough, she said, "we are in trouble. We cannot afford inflation to be a runaway train."

Newsletter

Related Articles

0:00
0:00
Close
Deputy Prime Minister Angela Rayner Purchases Third Property Amid Housing Tax Reforms Debate
HSBC Switzerland Ends Relationships with Over 1,000 Clients from Saudi Arabia, Lebanon, Qatar, and Egypt
Sharia Law Made Legally Binding in Austria Despite Warnings Over 'Incompatible' Values
Italian Facebook Group Sharing Intimate Images Without Consent Shut Down Amid Police Investigation
Dutch Foreign Minister Resigns Amid Deadlock Over Israel Sanctions
Trump and Allies Send Messages of Support to Ukraine on Independence Day Amid Ongoing Conflict
China Reels as Telegram Chat Group Shares Hidden-Camera Footage of Women and Children
Sam Nicoresti becomes first transgender comedian to win Edinburgh Comedy Award
Builders uncover historic human remains in Lancashire house renovation
Australia Wants to Tax Your Empty Bedrooms
MotoGP Cameraman Narrowly Avoids Pedro Acosta Crash at Hungarian Grand Prix
FBI Investigates John Bolton Over Classified Documents in High-Profile Raids
Report reveals OpenAI pitched national ChatGPT Plus subscription to UK ministers
Labour set to freeze income tax thresholds in long-term 'stealth' tax raid
Coca‑Cola explores sale of Costa coffee chain
Trial hears dog walker was chased and fatally stabbed by trio
Restaurateur resigns from government hospitality council over tax criticism
Spanish City funfair shut after serious ride injury
Suspected arson at Ilford restaurant leaves three in critical condition
Tottenham beat Manchester City to go top of Premier League
Bank holiday heatwave to hit 30°C before remnants of Hurricane Erin arrive
UK to deploy immigration advisers to West Africa to block fake visas
Nurse who raped woman continued working for a year despite police alert
Drought forces closures of England’s canal routes, canceling boat holidays
Sweet tooth scents: food-inspired perfumes surge as weight-loss drugs suppress appetites
Experts warn Britain dangerously reliant on imported food
Family of Notting Hill Carnival murder victim call event unmanageable
Bunkers, Billions and Apocalypse: The Secret Compounds of Zuckerberg and the Tech Giants
Ukraine Declares De Facto War on Hungary and Slovakia with Terror Drone Strikes on Their Gas Lifeline
Animated K-pop Musical ‘KPop Demon Hunters’ Becomes Netflix’s Most-Watched Original Animated Film
New York Appeals Court Voids Nearly $500 Million Civil Fraud Penalty Against Trump While Upholding Fraud Liability
Elon Musk tweeted, “Europe is dying”
Far-Right Activist Convicted of Incitement Changes Gender and Demands: "Send Me to a Women’s Prison" | The Storm in Germany
Hungary Criticizes Ukraine: "Violating Our Sovereignty"
Will this be the first country to return to negative interest rates?
Child-free hotels spark controversy
North Korea is where this 95-year-old wants to die. South Korea won’t let him go. Is this our ally or a human rights enemy?
Hong Kong Launches Regulatory Regime and Trials for HKD-Backed Stablecoins
China rehearses September 3 Victory Day parade as imagery points to ‘loyal wingman’ FH-97 family presence
Trump Called Viktor Orbán: "Why Are You Using the Veto"
Horror in the Skies: Plane Engine Exploded, Passengers Sent Farewell Messages
MSNBC Rebrands as MS NOW Amid Comcast’s Cable Spin-Off
AI in Policing: Draft One Helps Speed Up Reports but Raises Legal and Ethical Concerns
Shame in Norway: Crown Princess’s Son Accused of Four Rapes
Apple Begins Simultaneous iPhone 17 Production in India and China
A Robot to Give Birth: The Chinese Announcement That Shakes the World
Finnish MP Dies by Suicide in Parliament Building
Outrage in the Tennis World After Jannik Sinner’s Withdrawal Storm
William and Kate Are Moving House – and the New Neighbors Were Evicted
Class Action Lawsuit Against Volkswagen: Steering Wheel Switches Cause Accidents
×