Upgraded UK growth forecast to have 'little impact on monetary policy'

The International Monetary Fund (IMF) has upgraded its growth forecast for the UK economy this year, but warned that risks remain from both domestic and international uncertainty.

The IMF has upgraded GDP from 0.8% to 1% for 2026, stating that the UK "remained resilient" from external shocks, but that the ongoing conflict in West Asia could impact growth due to higher energy and food prices.

It said "domestic uncertainty could also add to the already volatile global environment, holding back consumption and investment decisions".

Last month, the IMF predicted that the UK would suffer the sharpest cut to economic growth out of the world's richest economies.

The IMF's latest upgrade is a very welcome respite for the UK economy, but probably contributes little to changing monetary policy or improving borrowing costs, according to George Lagarias, chief economist at Forvis Mazars.

He commented: "It’s a (very) welcome respite for the UK economy, presently beset by domestic uncertainty, rising borrowing costs, a global trade war and a seemingly interminable tumult in the Middle East. The IMF upgraded GDP growth prospects for 2026, from 0.8% to 1%, citing economic resilience and better-than-expected growth earlier in the year. 

"With that said, the upgrade is mostly a backward-looking one, and would probably contribute little to changing monetary policy or improving borrowing costs. The Fund cites significant challenges to growth and inflation if the Hormuz Strait remains closed for much longer."