The UK economy is set to expand more than initially predicted, according to a new outlook from the IMF.
This upward revision marks a promising turn as Chancellor Rachel Reeves prepares for the upcoming Budget.
A key driver of this revised growth forecast is the decrease in the inflation rate, which dipped to 1.7% in September—its lowest in over three years. Lower inflation has eased financial pressures on businesses and consumers alike, while stabilising energy prices have also played a crucial role.
These factors have allowed the Bank of England to consider further reductions in borrowing costs, which would not only benefit mortgage holders but also assist in governmental fiscal management.
Current borrowing rates hover around 4%, with the Bank of England potentially lowering them further.
Goldman Sachs forecasts a significant reduction, suggesting rates could fall to 2.75% by the end of next year.
These adjustments indicate a more favourable environment for lenders and borrowers, fostering economic activity and supporting household finances.
While the UK’s growth outlook has improved, it remains modest compared to international benchmarks.
The relatively slow rate of growth underscores ongoing challenges, but experts highlight it as a step in the right direction.
Maintaining momentum in economic reform and investment is crucial to closing the gap with global competitors.
Dan Coatsworth, an investment analyst at AJ Bell, remarks that the upgraded forecast is a timely advantage for the Chancellor, though he acknowledges that the UK must remain cautious given broader economic uncertainties.
He points out that while the figures offer hope, sustained efforts are essential for long-term stability.
In summary, while the UK faces significant hurdles, revised growth forecasts offer a glimmer of hope.
Maintaining focus on fiscal and structural reforms remains critical for sustained recovery.