Displaying items by tag: UK economy

UK inflation held steady at 3.8% in September, slightly below expectations and suggesting the current spike may have peaked. Economists predict a gradual decline through spring as last year’s regulated price rises drop out of the index, with inflation potentially nearing the 2% target by late next year. Although still nearly double the Bank of England’s goal, stability in food and energy prices has reduced the risk of inflationary “doom loops” where rising wages and prices fuel each other. The improved outlook has prompted renewed speculation about interest rate cuts — possibly four over the next year, bringing rates down to 3%. Market confidence has lifted, with government borrowing costs falling to their lowest levels in months. Chancellor Rachel Reeves, who recently pitched Britain as “the best place to invest,” now has slightly more room to manoeuvre ahead of a challenging Budget. However, analysts warn that new tax measures or global shocks could quickly reverse these gains.

The International Monetary Fund (IMF) has urged the Bank of England to cut interest rates at least twice more in 2025 to support the UK economy. The Bank’s base rate currently stands at 4.25%, down from a post-Covid peak of 5.25%, following efforts to reduce inflation, which has now eased to 3.6%. Despite slight improvements in GDP projections - 1.2% for 2025 and 1.4% for 2026 - the IMF warned that global trade uncertainty and fiscal deficits could disrupt recovery. Chancellor Rachel Reeves welcomed the UK’s position as the fastest-growing G7 economy in Europe but faces criticism over recent tax increases, including higher National Insurance contributions and the extension of inheritance tax to pensions. Bank Governor Andrew Bailey suggested these tax hikes may be dampening business investment and wage growth. The IMF highlighted risks of financial market volatility and called for a cautious yet responsive approach. As global economic pressures persist, the UK must balance fiscal discipline with growth-friendly policies that promote employment, investment, and long-term stability. See