IMF Chops UK Growth Forecast as Trump Tariffs Hit Global Economy

• Britain's economic growth forecast for 2025 received the sharpest downgrade of any major European economy from the International Monetary Fund on Tuesday as the UK braces for the global fallout from U.S. President Donald Trump's trade tariffs.
• The Fund also said British inflation would be higher this year than it had thought in January, and higher than in any other Group of Seven country - showing the economic risks facing finance minister Rachel Reeves and Bank of England Governor Andrew Bailey, who will attend IMF spring meetings this week. The higher U.S. import tariffs were likely to reduce pressure on inflation in Britain, as in most economies, Gourinchas said. BoE rate-setter Megan Greene had earlier said she expected the diversion of exports away from the U.S. would push down inflation in Britain.
• Such a hawkish message may help Japan fend off criticism from Trump that Tokyo is keeping the yen artificially weak to give its exports a competitive trade advantage, some analysts say. At the two-day policy meeting ending on May 1, the BOJ will cut its economic growth forecasts and warn of escalating risks from Trump's sweeping tariffs that are set to dent global demand, the sources said.
• Despite the weaker outlook, the Fund bumped up its forecast for British inflation this year by 0.7 percentage points from its January forecast, to 3.1%. On average, the IMF's inflation forecast for advanced economies rose 0.4 percentage points, while that for the United States, where Trump's tariffs will hit prices directly, jumped 1.0 point.
• The IMF noted that the increase in its forecast for UK inflation "primarily reflects one-off regulated price changes". The IMF further noted that it expected British inflation to slow to 2.2% in 2026, close to the BoE's 2% target.

(Source: Reuters)