United Kingdom: Staff Concluding Statement of the 2026 Article IV Mission United Kingdom: Staff Concluding Statement of the 2026 Article IV Mission

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United Kingdom: Staff Concluding Statement of the 2026 Article IV Mission

May 18, 2026-While the UK economy has remained resilient in recent years, the war in the Middle East is dampening near-term prospects. Growth is projected to slow to 1.0 percent this year, then gradually recover as the shock dissipates. Higher energy prices are expected to push inflation up temporarily and delay the return to the central bank's target by about one year.

Monetary policy should remain sufficiently restrictive to ensure that second-round effects from higher energy prices to inflation are contained. Under the current energy price outlook, holding rates for the remainder of the year should be sufficient to bring inflation back to target by end-2027. But given heightened uncertainty, decisions should remain data dependent and taken meeting by meeting, with clear communication on the Bank of England's reaction function.

The authorities' medium-term fiscal strategy continues to strike a good balance between deficit reduction and growth-friendly spending, and recent changes to the fiscal framework strengthen policy stability and credibility.

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Source: imf.org


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