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IMF raises UK inflation forecasts citing Middle East conflict risk

Summarised from 4 outlets · Updated 13 Oct, 03:57 · Archive

The IMF has raised its forecasts for UK inflation in 2026 and 2027, warning that the Middle East conflict could push food and energy prices higher.

The International Monetary Fund has raised its forecasts for UK inflation in 2026 and 2027, citing the Middle East conflict as a potential threat to food and energy prices. The IMF's latest World Economic Outlook predicts that UK consumer prices will rise by 3.3% in 2026, up from its previous forecast of 3.2%. Inflation is expected to ease to 2.8% in 2027, but that is still considerably higher than the 2.4% rate the IMF previously forecast. This would leave Britain with the joint second-highest inflation rate among the G7 group of major advanced economies.

The IMF warned that a prolonged stalemate or further escalation in the Middle East could "keep energy and food prices elevated and volatile", weigh on economic growth and worsen the fiscal position of governments. The global body also cautioned that the impact could be compounded by extreme weather, cyber attacks and assaults on energy infrastructure. The upgrade comes as households continue to grapple with the cost of living, with higher energy bills expected to put further pressure on family finances.

The latest figures from the Office for National Statistics showed inflation rising to 3.1% in August, with price pressures expected to increase further in the coming months. The Bank of England has warned that inflation could climb to "slightly above 4%" in the first quarter of 2027, partly because of another rise in the household energy price cap in January. However, inflation is then expected to fall back over the course of 2027.

The IMF also downgraded its growth forecast for the UK economy in 2027. Prime Minister Andy Burnham is facing a weaker economic outlook than previously expected.

IMF raises UK inflation forecasts citing Middle East conflict risk
Image: Gazette & Herald

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In this story: International Monetary Fund · Bank of England · Office for National Statistics · United Kingdom · Middle East · G7 · Andy Burnham

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