2023-10-10 12:29:39
The Bank of England will need to raise interest rates at least once more and maintain them through much of next year, the International Monetary Fund (IMF) has said. The move has put a damper on expectations that the Bank of England may start cutting interest rates soon.
The IMF’s chief economist, Pierre-Olivier Grandchat, told reporters on Wednesday at the launch of the World Economic Outlook that the UK faces “low growth” this year and next. The IMF predicts that the Bank of England will raise interest rates by another 0.25 percentage point to 5.5% and pause tightening.
Mr. Granchat, Chief Economist of the IMF (October 10)
Photographer: Hollie Adams/Bloomberg
“The overall view of the UK is that growth momentum is quite weak, the labor market is cooling, and inflation is very persistent,” Granchat said. “Monetary policy will need to remain tight for some time into next year,” he continued.
Last month, the Bank of England’s Monetary Policy Committee (MPC) held off on raising interest rates for the first time in about two years. Markets were increasingly betting that the Bank of England would soon reverse its tightening policy to avoid a recession.
The IMF has raised its forecast for British economic growth this year by 0.1 percentage point to 0.5%, but revised it down to 0.6% next year from its previous forecast of 1%. Inflation is expected to average 3.7% next year, slowing from the 7.7% expected this year but still above the BoE’s 2% target.
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Original title:UK Will Need to Hike Rates to 5.5% and Hold Them There, IMF Says
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