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The International Monetary Fund (IMF) has warned that UK interest rates will not fall below 3.5% for at least another four years.
The IMF said Britain’s inflation rate would soon reach its 2% target and GDP growth would be among the highest of any major Western economy.
But at the same time, they concluded that rapid population growth due to immigration will cause GDP per capita growth to be slower than in the United States, Germany, France, and Japan.
The IMF said in its latest World Economic Outlook on Tuesday that it expects interest rates to fall from their current level of 5.25% over this year and next.
But the fund says it will remain stable at 3.5% until at least the end of 2028, far above the level before the inflation spike began in 2021. This means the UK’s borrowing costs will remain higher than those in the US, EU and Japan.
Britain’s economy is expected to grow by 0.5% this year and 1.5% next year, faster than most other G7 members.
But on a per capita basis, Britain’s GDP will be lower than most G7 allies this year and next, and higher than only Italy and Canada.
The IMF says that labor shortages in the UK began before the coronavirus outbreak and have worsened since then, contributing to the UK’s more persistent inflation than comparable countries. I warned you.
“Tighter labor markets prior to the pandemic may partly explain why inflation in the UK was higher than in the US or the euro area after the pandemic began,” the report said.
A Treasury spokesperson said: “Today’s report shows we are winning the battle against high inflation, and the IMF expects inflation to fall at a much faster pace than previously expected. ” he said.
“While medium-term growth forecasts are optimistic, like other peers, the UK’s short-term growth is being affected by rising interest rates, with Germany, France and Italy all experiencing more significant rating downgrades than the UK. are doing.”
The World Economic Outlook includes an upward revision to the IMF’s estimate of global economic growth this year, with global GDP expected to increase by 3.2%.
Pierre-Olivier Grinchat, head of research at the fund, said: “Despite many gloomy predictions, the world has avoided recession, banking systems have proven largely resilient, and major emerging market economies have “We did not experience a sudden economic shutdown.”