IMF Warns Bank of England to Be Very Cautious on Future Rate Cuts

IMF Warns Bank of England to Be Extremely Cautious on Future Rate Cuts

London/Washington — October 14, 2025:
The International Monetary Fund (IMF) has warned that the Bank of England must act with extreme caution when considering future interest rate cuts, as inflationary pressures in the United Kingdom remain a serious concern.

According to IMF Chief Economist Pierre-Olivier Gourinchas, rising inflation expectations among households and investors could undermine the central bank’s strategy to ease monetary policy. He stated that while some inflation factors are temporary, the risk of sustained inflation cannot be ignored.

In its latest economic outlook, the IMF projected that the UK’s average inflation rate will remain around 3.4% in 2025, before easing to 2.5% in 2026. These figures suggest that Britain could remain one of the highest-inflation economies among the G7 nations.

The IMF urged the Bank of England to proceed gradually and carefully with any interest rate adjustments to ensure inflation is fully contained. Gourinchas emphasized:

“The Bank of England must move carefully along the path of rate cuts and make sure inflation continues to decline on a sustainable basis.”

The Bank of England recently held its base interest rate steady at 4%, after several reductions earlier this year. The most recent decision was passed by a narrow margin within the Monetary Policy Committee (MPC).

Governor Andrew Bailey acknowledged that the UK job market is weakening and that economic growth is under pressure. However, he maintained that any further rate cuts would depend on clear evidence that inflation is stabilizing near the 2% target.

Economic analysts warn that a premature rate cut could reignite inflationary pressures, while delaying cuts for too long might deepen the ongoing economic slowdown. The IMF also highlighted that Britain’s GDP growth is expected to reach 1.3% in 2025, slightly higher than previous forecasts but still modest by historical standards.

Conclusion

The IMF’s warning serves as a crucial reminder for British policymakers: maintaining balance is essential. The Bank of England must avoid both over-tightening and over-easing. A well-calibrated monetary policy could help Britain navigate between inflation control and economic recovery, ensuring long-term financial stability.