IMF Reports UK Economy Escapes Recession, Yet Inflation Remains Concerning – WSB-TV Channel 2

The International Monetary Fund has revised its growth forecast for the UK economy, predicting that it will avoid recession in 2021. The IMF’s latest assessment of the domestic demand suggests that it is more resilient than previously thought. The fund now expects the UK economy to grow 0.4% this year, up from the previous forecast of 0.3%. This new forecast is in line with the Bank of England’s earlier prediction, which also raised its economic outlook recently. Despite this positive news, the IMF warns that inflation is likely to remain high for years to come and may not reach the Bank of England’s 2% target until 2020.

The Bank of England and other central banks have been aggressively raising interest rates for the past 18 months or so in response to the inflation spike caused by the pandemic-related bottlenecks. Wednesday’s data shows that UK inflation is expected to fall below 10%¬†for the first time since August, largely due to a rise in prices following the invasion of Ukraine.

The IMF has commended the UK government for regaining its credibility following a “stress episode” in September 2020, when the previous Prime Minister Liz Truss announced massive tax cuts that raised concerns about the country’s financial stability. Truss’ premiership came to an end soon after, and Rishi Sunak was appointed as Prime Minister with a focus on restoring confidence in the country’s finances by reversing tax cuts and tightening spending. With a general election scheduled for next year and the Conservatives leading the way in opinion polls, there are calls for Mr Sunak to cut taxes, something that the IMF warns against.

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